Adj. EBIT in line with expectations

EBIT estimate changes primarily due to IFRS 16

Trading below book value per share

Profitability focus showing its positive effects
Oboya reported Q3 sales of SEK 109m (ABGSCe SEK 113m), an 11% drop y-o-y and adj. EBIT of SEK -2.2m (ABGSCe SEK -2.2m). Gross profit was SEK 27.5m, resulting in a gross margin of 25.2% (ABGSCe 25.5%) The lower sales volume y-o-y was partly driven by increased profitability focus, shifting out unprofitable contracts and also by the Combipot divestment, which we understand took a hit of SEK -6m. Opex declined by SEK 4.2m y-o-y and came in SEK 1.9m below our estimates, despite the inclusion of some EOs taken in the quarter. These were related to the warehouse move (ABGSCe SEK 0.75m), which is expected to save Oboya SEK 5m per year, according to management. We believe this is further evidence of Oboya’s cost-cutting strategy already bearing fruit.

Impressive opex reduction of SEK 4.2m y-o-y
The Q3 figures were largely affected by the property divestment in China, boosting reported EBIT by SEK 20.8m. This will free up cash and improve Oboya’s financial situation. We make minor estimate revisions as the report came in slightly below our expectations on sales and gross margins; however, we lower opex further as we believe the Q3 report showed additional evidence of current initiatives paying off. Overall, this results in our positive adj. EBITDA estimate revisions. However, when we update IFRS 16 leasing, and lower expected D&A as a result, EBIT estimates improve even further.

2019e P/BVPS 0.73x and 2020e EV/EBIT 14x
We expect an organic sales CAGR of 3% for ’19-’21 and we see EBIT margins improving due to reduced opex from the focus on profitability. On our estimates, the adj. EBIT margin improves from 1.4% to 3.6% resulting in an adj. EBIT CAGR for ’19-’21e of 42%. Oboya is currently trading below its equity value at a P/B of 0.73x, and a ’20e EV/EBIT of 14x, which drops to 12x in ’21e. We also see the adj. net d
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