Organic growth of 12%, EBITA margin unchanged y-o-y

Mixed, but overall positive outlook

Trading at 15x ‘21e EV/EBITA

Industrial solutions better than expected
Nolato delivered a solid Q2 report, with organic growth of 12%, 5pp above our forecast of 7%. The continued inventory build-up and launch of new gen. HTP products resulted in 32% organic growth for Integrated solutions, short of our expectation of 40%. The majority of the group’s sales beat was a result of better-than-expected sales in Industrial solutions, as volumes only declined by 16% (ABGSCe -37%). Adj. EBITA was SEK 269m (+8% vs ABGSCe) for a margin of 11.7%, 30bp above ABGSCe. The margin was supported by high incremental EBITA margins of 27% and 18% for Medical and Integrated solutions, respectively. However, Medical solutions received government support of SEK 10m, increasing the segment’s margin by 140bp, and the group’s by 50bp.

Sequential improvement partially offset by HTP volumes
We see continued demand for diagnostics products related to COVID-19, as testing volumes are still increasing. This should support Medical solutions in Q3, which also faces easy comps for the quarter. Hence, we estimate Medical to grow ~15% y-o-y organically in Q3’20. For Integrated solutions, the volume increase stemming from inventory build-up of HTP products should fade in Q3’20, reducing growth for H2. However, the return to normal for ECM and mobile products adds support, leaving our Q3’20 growth for the segment at +12%. Industrial solutions continues to face headwinds, as it has ~40% exposure to automotive, which is still running at depressed rates. We leave our margin estimates generally unchanged, keeping our view of a gradual EBITA margin expansion to ~12% in ’22.

Updated fair value range to SEK 650-730
The share is up 29% YTD, trading at ~15x ‘21e EV/EBITA (5y avg. ~14x) on our updated figures. We adjust our fair value range to SEK 650–730, based on our positive estimate revisions.

info@introduce.se (Introduce.se)

ABG Sundal Collier - Introduce.se