7% organic sales growth, 43% EBIT growth

Margins expanded from 10.7% to 14.4%, mkt share gains

10x EV/EBITA ‘21e, 6-7% lease adj. FCF yields

Q2 details
The Nordic waterproofing market seems to have been very strong in the quarter. Sales arrived at SEK 949m (+6% vs. ABGSCe 899m), +7% y-o-y of which +7% was organic (ABGSCe +2%). EBIT increased 43% y-o-y to SEK 137m (+33% vs. ABGSCe 103m), for a margin of 14.4% (ABGSCe 11.4%, 10.7% in Q2’19). The last time adj. EBIT margins were above 14% was in Q2-Q3’16. Both Sweden, Denmark and Europe saw double-digit growth in the quarter, while both divisions recorded higher margins y-o-y. NWG notes that inventory build-ups could have positively supported demand, and that the company has seen continued market share gains. Within its pre-fabricated element business, NWG notes that the order book for 2020 is fully booked, despite lower sales during the quarter. As of the end of Q2’20, NWG has hedged 55% of expected 2020 volumes and 46% of expected 2021 volumes.

Estimate changes
Based on the Q2 report alone, we believe preliminary estimate revisions could amount to positive double-digits on 2020e EBIT. However, we believe the strong performance in light of the current COVID-19 environment should likely not be fully extrapolated into 2021e-2022e. For ’19-‘22e, we currently forecast a 3% organic sales CAGR and a 5% adj. EBITA CAGR.

Final thoughts
NWG’s share price return over the last three months is +39% compared to the Carnegie Smallcap index at +27%. On our pre-Q2 estimates, the company is trading at 10x EV/EBITA ‘21e and 6-7% lease adj. FCF yields.There is a conference call at 10.00 CET, dial-in: SE +468 505 583 51, UK +44 33 33 00 92 66

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ABG Sundal Collier - Introduce.se