Expect sales +18% driven by HTP and FX

SEK 35m cost following closing of Medical Solutions site

Fair value range of SEK 490-580

Q4 expectations: Normalised HTP volumes to support sales
We expect Nolato to have a decent quarter, with growth returning to Integrated Solutions. As previously noted by the company, Medical Solutions sales are expected to remain flat y-o-y and the EBITA margin will be negatively affected by approx. SEK 18m following the decision to close down one of its UK facilities. Also, weaker end markets in Industrial Solutions are likely to leave a mark on group performance. However, we expect sales to grow by 18% y-o-y with organic growth of 11%; this is entirely attributable to HTP products seeing normalised volumes and easy comps. As a result, we expect sales of SEK 2,092m and EBITA of SEK 231m on a margin of 11.0% (12.0%) from the SEK 18m cost mentioned above. We estimate net income of SEK 170m for the period, resulting in EPS of SEK 6.42 (5.98), up 7% y-o-y.

Forecast changes: negative impact of SEK 35m in medical
In early January 2020 Nolato communicated its plan to consolidate its Medical Solutions business in the UK. As a result, the production site in Portsmouth is scheduled to be closed by Dec ’20 with a majority of the customer base to be transferred to Nolato’s Newcastle site. The initiative is expected to cost SEK 35m, and to be split roughly 50/50 between Q4’19 and Q1’20. The impact on cash flow will be around SEK 30m. We have adjusted our estimates accordingly. In addition, we have updated our FX assumptions while merely fine-tuning the remaining estimates.

Fair value range of SEK 490-580
The share is up 60% in the last 12 months and currently trades at SEK 615. Our sum-of-the-parts valuation methodology produces a fair value range of SEK 490-580. The share is trading at 15x ‘20e EV/EBITA.

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ABG Sundal Collier - Introduce.se