Q4’19 sales +27% and adj. EBITA margin flat y-o-y

’20 margin estimates down 30bp, but still expanding

Share trades 30% below peer group average

Solid sales growth, Nordic margins below estimates
HANZA reported a weaker than expected quarter. Sales were 2% above our estimate at SEK 548m (ABGSCe SEK 535m) while adj. EBITA came in below our forecast at SEK 17m (-28% vs. ABGSCe 23m). Adj. EBITA margin was 3.0% (flat y-o-y); we expected 4.3%. The miss was primarily in the Nordic region, where the margin was 4.0% vs. our 7.0%. The reason for the miss was a larger than expected impact from factory shutdowns during the Christmas holiday period. Looking at ’19 overall, HANZA grew sales by 14% to SEK 2.1bn while the EBITA margin was down 10bp to 3.3% (3.4% in ’18). EPS declined 1% y-o-y to SEK 0.73.

Est: Sales largely unchanged, but margins slightly lowered
While we only fine-tune sales estimates, we lower our ‘20e EBITA margin estimates by 30bp on concerns of the coronavirus outbreak potentially causing short-term issues, primarily on the component supply side. On the other hand, several initiatives that burdened margins in 2019 have now been completed and should provide a relief on earnings over ‘20e. We still estimate that margins will improve, but at a somewhat lower rate than previously anticipated. For the year overall we expect sales growth of 13% and EBITA margin expansion from 3.3% to 4.4%, which we expect would result in EPS of SEK 1.12.

‘20e EV/EBITA -30% vs. our peer group
HANZA is up 11% y-t-d and currently trades at 9.8x EV/EBITA ‘20e, which is 29% below our peer group average. While margins are currently lower, we consider the current gap to peers to be high. Our three-scenario DCF valuation provides a value range of SEK 13-30, with the second scenario yielding an implied share price of SEK 21.5. More information regarding the assumptions can be found in our coverage initiation report (“All you need is HANZA”) from 28 January 2020.

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