No surprises after profit warning

Net recruitment again, and more will come

Trading at EV/S of 0.4x and EV/EBIT of 16.3x for ‘20e

Hifab sees strong demand continuing
Hifab reported net sales of SEK 90.6m (105.5m), -1% vs. ABGSCe, and EBIT of SEK -6.5m, which was already communicated in the profit warning on 12 July. On the Swedish market, Hifab still sees strong demand, with a cooling housing market offset by increased demand for facilities and infrastructure. Based on our calculations, the net recruitment amounted to 16 employees in Q2, or up 6% vs. Q1. We expect that this trend will continue in the coming quarters, as Hifab has hired an additional 26 employees that are yet to start. Further, it has more than 30 job openings posted on its website. This helps to confirm the view Hifab has about strong demand in a market that has been rather weak so far in 2019.

’19-21e sales estimates up…
In our note after the warning, we did not raise our sales estimates as we only had gross recruitment figures to hand. Now, we can confirm a healthy net recruitment pace, which leads us to raise our sales estimates by 2.6-5.3% for ’19-21e. If Hifab successfully fills the majority of the vacancies it is advertising, we will likely have to raise sales estimates even more, depending on how utilization improves from the current weak levels.

…but we are slightly cautions on the EBIT margin short term
Although we view the sales outlook more positively, we believe it is still too early to draw any conclusion about how it will affect margins. Hifab had good cost control with declining sales in ’17-18, and we believe there is potential to reach EBIT margins of historical highs at 4%. We think it will not materialize until ‘21, though, as a high recruitment pace will likely lead to initial inefficiencies. Given that, we lower the ‘20e EBIT margin by 0.6pp, to 2.5% (3.1%).

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