Favourable long-term growth outlook in Medical Solutions

Integrated Solutions beyond HTP still attractive

Acquisition of Ja-Bar Silicone adds 2% to sales

Growth opportunities in Medical Solutions
As anticipated, the CMD focused on the growth opportunities within Medical Solutions. With market growth of 3-5% per year, Nolato expects to outgrow the market supported by a combination of new product development and a strong outsourcing trend. We expect the majority of growth to come from the development of new products, as the company works to gain a position as a complete solutions provider, as opposed to a manufacturing partner. We note that, on average, organic growth has been ~10%, and while Q3’19 will face tough comps, we expect that long-term organic growth should be able to stay in line with historical levels.

Acquisition adds to EMC expertise and growth beyond HTP
The acquisition of Ja-Bar Silicone adds ~2% to group sales and 4% to Integrated Solutions and points to good profitability. The acquisition also provides Nolato with complementary EMC production techniques, market synergies and increased US exposure - a good deal at 4-5x EBITDA. At the CMD, Nolato highlighted prospects within EMC/thermal as a major opportunity in the future for Integrated Solutions, benefitting from trends such as electrification of vehicles and IoT. Nolato also pointed to its expertise within consumer electronics, producing products for leading companies such as Sony, Google, Sonos and Fitbit. With regards to heated tobacco products (HTP), Nolato noted that the normalised inventory situation is being addressed since the inventory build-up associated with the initial launch should provide growth in line with the overall market going forward.

Estimates unchanged besides acquisition impact
As expected, Nolato reiterated financial targets at the CMD and we make no major adjustments to estimates besides the integration of the Ja-Bar Silicone acquisition. Overall, the CMD was insightful, but did
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