Expect EBITA up 14% y-o-y and margin up 50bp

Change in ‘20 and ’21 estimates by excluding future M&A

Share is trading significantly above historic levels

Q3’19/20 estimates: difficult comps, but support from M&A
We expect a decent quarter from Lagercrantz, but note that comps are strong with sales growth of 14% (7% organic) in Q3’18/19. We note that Niche Products in particular faces difficult comps with 29% growth in the same quarter last year. This time we still expect double digit growth of 13%, supported by 8% from acquisitions and 2% from FX. As for our group estimates, we expect sales of SEK 1,114m, indicating growth of 10% (3% organic, 5% M&A, 2% FX). The focus on market-leading niche product companies should help to maintain a stable GM and recent margin accretive acquisitions should boost the EBITA margin. We estimate EBITA of SEK 156m, on a margin of 14.1% (13.6%). We estimate EPS of SEK 1.63, up 26% y-o-y.

Forecast changes: excluding future M&A from estimates
We have taken down estimates for ‘20e and ‘21e by 4.2% and 7.9% respectively. This is attributable to us changing approach from previously including future estimated acquisition growth to excluding it. On an underlying basis we leave estimates largely unchanged. For FY’19/20 we expect sales of SEK 4,242m (up 8% y-o-y, 2% org.) and an EBITA-margin of 13.7% (13.2%). Overall, we expect EPS to grow 13%.

Next 12-month EV/EBITA is 24% above the 5y average
The share has enjoyed a 28% run since mid-October, currently trading at 19x ’19/20e, 12% above the broader peer average (but -6% vs. Indutrade and -11% vs. Lifco). On a NTM basis, the share is trading at a 24% premium to its 5y average. We like the smaller size of Lagercrantz compared to core peers, the benefits of stable acquired growth, plus higher margins over the next three years. But current valuation levels are significantly above historic averages both for Lagercrantz and its peers.

info@introduce.se (Introduce.se)

ABG Sundal Collier - Introduce.se