Garo
GARO - Weaker start than expected to ’20 (ABG Sundal Collier)
2020-05-20 07:54
EBIT SEK 19m -36% y-o-y (-23% vs. ABGSCe)
’20 sales estimate unchanged , EPS down 3%
Share up 42% since March, value range: SEK 233 - 353
Q1 below expectations, margins remain softGARO’s Q1’20 was below our expectations. Sales were SEK 248m (-5% vs. ABGSCe 261m) and growth was flat y-o-y (0% organic, 0% FX). Sales in E-mobility (23% of group) rose by only 2% (ABGSCe 18%). Project business was up by 7% y-o-y. Remaining segments were soft: Installation Products (47% of group) declined by 1% and Temporary Power by -23%. EBIT was SEK 19m (-23% vs. ABGSCe SEK 25m) on a margin of 7.6% (ABGSCe 9.4%), -410bp vs. Q1’19. The main reason for the miss is an exceptionally large FX impact of SEK 6.5m due to the devaluation of SEK and NOK vs. EUR; adjusted for this, EBIT was largely in line with our estimate. Net income for the period was SEK 15m (ABGSCe 17m), -41% y-o-y.
COVID-19 hurting in Q2, both sales and profitability
GARO highlights that COVID-19 will leave a mark on Q2’20e, mainly for markets outside of Sweden (where impact on demand should be limited). While E-mobility was weak in Q1’20, sales in Sweden were strong in April and May. We are still somewhat sceptical of development in Norway and other markets. In addition, we note strong comps from Q2’19, which is also true for Installation Products. We expect group organic growth to decline by 9% in Q2’20e, and expect -1% for the year. However, the recent acquisition of EV Charge Partner Sweden AB should provide added sales of ~1%. We have long highlighted the decreasing margins of the group, and we expect this trend to continue. We lower EBIT margin to by 30bp for ‘20e and 20bp for ‘21e. Our EBIT estimates are thus lowered by 3% and 2%, respectively.
GARO share is currently trading at EV/EBITA of 25x on ’21e
The share price is up >40% since mid-March; the share now is trading at ’21e EV/EBITA to ~25x. While we think the share is a good way for investors to gain exposure to the roll-out of EV-charging infrastructure, E-mobilit
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