Very solid Q1 18/19 beats estimates

Major contribution from acquisitions trickling in

Good set-up with triggers

Surprise on the upside, broad overshoot
Sales were 8% better than expected and EBITA 11% thanks to stronger operational leverage (on the back of higher organic sales), with the EBITA margin at 10.9% (ABGSCe 10.4% vs cons 10.5%). Organic sales growth of 9% smashed our expectation of 1%. Despite some positive seasonality, the number is very strong with an overshoot in all segments. The positive deviations mainly related to Components and Industrial Process. All segments operated at very decent margin levels and only Energy reported lower margins. The business climate among customers is still strong and the process industry is experiencing higher activity.

No slowdown seen, we raise estimates
We have increased our EBITA estimate as we have become more optimistic on margin expansion while volumes improve. Our 18/19e EBITA is +6% and 19/20e +5%, with an 18/19e margin of 10.6% (10.3%) and 19/20e of 10.7% (10.5%). Worth noting is that we only incorporate announced acquisitions for the current year. More will come and EBITA growth of ~20% in 18/19e should be easy to achieve (also in a scenario of lower incremental margins than our estimates suggest). M&A headroom is strong with 18/19e ND/EBITDA of 1.4x, even when factoring in acquisition prices somewhat above historical levels (5.5x EBIT vs 5.0).

Good set-up for high earnings growth
Looking ahead, our previous soft organic scenario is slightly altered by the report and outlook. We now forecast 2.9% organic growth in Q2-Q4 (1.8%). However, we expect stronger total growth y-o-y, due to: 1) consolidation of the last month’s six (!) acquisitions, 2) FX tailwinds, and 3) Batteriunionen will not be burdened in the next quarter or beyond. We acknowledge that a rebound and pent-up demand in some customer segments could still make our organic forecasts too cautious. On valuation, Addtech is trading at EV/EBITA 18/19e of 14.7x and
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ABG Sundal Collier - Introduce.se