Q2 report this Friday, 24 July at 08.00 CET

EBIT up 18-3% ‘20e-‘22e on continued good demand

10x EBITA ‘21e on >10% historical EBITA CAGR

Q2 expectations
We expect sales of SEK 899m, up 1% y-o-y (+2% organic, -1% FX), with continued strong renovation demand in the Nordic regions offsetting the negative impact from COVID-19 in the rest of Europe. In addition, the combination of stable volumes, favourable pricing and raw material costs lead us to expect an EBIT of SEK 103m, up 8% y-o-y for a margin of 11.4% (10.7%). For 2020, we forecast organic sales growth of 4% and adj. EBITA growth of 5%.

Estimate changes
Our initial fears of a negative COVID-19 impact have not materialised thus far, and we note that the news flow from other companies exposed to Nordic renovation activity has been positive. As a result, we raise our sales and EBIT assumptions for ‘20e by 8% and 18%, respectively. We remain cautious not to extrapolate too much from this uptick in demand, and thereby raise ‘21e-‘22e EBIT by 3-2%. For ’19-‘22e, we now forecast a 3% organic sales CAGR and a 5% adj. EBITA CAGR.

Insulated from COVID-19 with a history of earnings growth
Although most M&A discussions have likely been put on hold recently, we believe there is a high possibility of continued M&A activity during 2021 given the balance sheet headroom. By YE’20e, we forecast a ND/EBITDA of 1.5x while the company continues to generate strong cash conversion and >13% ROCE. On our estimates, NWG is currently trading at 10x EV/EBITA ‘21e while its historical adj. EBITA CAGR since 2012 has been 14%. Since 2015, NWG has delivered an EBITDA CAGR above other Nordic building/renovation peers while trading c. 20% below on 2021 EV/EBITA.

info@introduce.se (Introduce.se)

ABG Sundal Collier - Introduce.se