Elanders
Elanders - Falling dominoes headed our way (ABG Sundal Collier)

2020-04-01 19:00
Cyclical exposure amid an economic slowdown…
…with a strengthened but sensitive financial position
Trading on a normalised EV/EBITA of 8.6x in ’21e
COVID-19 sweeping over Elanders’ footprint
The COVID-19 outbreak implies massive effects for the real economy, and Elanders is exposed to several heavily affected cyclical end markets. China (6% of sales) saw steep Q1 production and demand shortfall within Electronics and Fashion & Lifestyle, but is now seeing signs of recovery. The effects have most likely spread to the remaining part of Asia (20% of sales). We expect the European Automotive and Industrial segments to underperform from March onwards as manufacturers have suspended production. Starting in mid-March, Americas will closely follow the development of the Asian region. Europe and Americas account for 63% and 11% of sales, respectively. We map out Elanders’ operational footprint and forecast a heavy short-term impact. Moreover, we note a strengthened but sensitive financial position with net debt/EBITDA of 3.1x (ex. leasing and NRIs of 2.5x) at YE’19.

Estimate revisions to account for turbulent times
We revise our estimates not only due to COVID-19 effects, but also due to a change of analyst coverage. We lower sales for ’20e-‘22e by ~12-2%, and estimate organic growth of -14% for FY’20 (-11% with FX). We change the main profitability metric to group-standard reported EBITA (EBIT). Considering the COVID-19 effects, our previous EBITA estimates were too ambitious in the short term. We still believe annual cost savings of SEK 60-75m will start to show in H2’20e, and take full effect in ’21e, but we lower our EBITA margin to 3.8-6.2% for ’20e-‘22e (from 6.0-6.7%) and initiate the estimated margin expansion from a lower base.

Long-term prospects overshadowed by market downturn
We believe that the recent restructuring actions can boost group profitability even further in the coming years, although this might be postponed during turbulent times. Elanders trades on normal
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Elanders B - I dag

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Stockholmsbörsen, OMXS30

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