Nilörngruppen
Nilörngruppen - Tough H1 over, dare to look beyond 2020 (ABG Sundal Collier)
2020-07-20 07:44
Sales -3% vs. ABGSCe
Adj. EBIT SEK 1.1m (ABGSCe 4.6m)
H2’20 looks rough, COVID-19 a potential trigger for RFID
Q2 detailsSales were 3% below our forecast of SEK 147m. Naturally, a large sales decline was expected due to the retail exposure. The order intake was SEK 99m, a decline of 42%. We believe the majority of the decline was seen at the beginning of the quarter. The gross margin of 38.1% was well below our forecast of 42.8%. This was an effect of write-downs of inventory and receivables of SEK 7.5m. Adjusting for this, the gross margin was 43.3%. EBIT was SEK 0.1m, and adj. EBIT SEK 1.1m vs. our forecast of SEK 4.6m. The company received SEK 5.8m in state subsidies in the quarter.
H2’20 looks rough, but RFID is around the corner
The inventory write-down could have been much worse. We believe the “double-checking” before actual deliveries has saved the company’s cash position materially. Looking into H2’20, we see continued headwinds. Deliveries from the company are done ~6 months before the actual collection is due from the retailer. As many retailers decided to delay their ’20 spring collections to ‘21, we believe this is going to affect the numbers quite heavily in Q2, so we have lowered ‘20e sales by 8%. Further, due to the customer bankruptcies, we have taken a more conservative approach to ‘21e-‘22e, and lower sales by 5% and EBIT by 11%-12%. However, when we look beyond 2020, we find some light in the turnaround potential. Given the significant logistics issues created for retailers during the pandemic, we believe an uptick in radio frequency identification (RFID) solutions demand is due. To our understanding, these carry a slightly lower gross margin than the legacy labels, but are much more expensive. There, we see significant margin potential in the opex scaling potential.
Trading at ‘20e-‘22e P/E 22.0x-6.8x, FCF yields >10%
On our updated estimates, the Nilörngruppen share is trading at ’20e-‘22e multiples of 22.0x-6.8x P/E and 13.3x-5.1x adj. EV/EBIT.
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