Addtech - Difficult comps and COVID-19 lead to soft Q2 (ABG Sundal Collier)

2020-10-23 17:44
Q2 EBITA down 19% y-o-y, margin -180bp
Estimates: FY’21/22 sales +1% EBITA +2%
Trading at 25x ‘21/22e EV/EBITA
Mild quarter with soft scrubber market dragging
Addtech Q2’20/21 was mild, with challenging comps and pandemic headwinds a challenge. Sales were SEK 2,723m (+2% vs. ABGSCe SEK 2,670m and +1% vs. consensus SEK 2,700m), organic growth was -10% (ABGSCe -13%), contribution from M&A and FX was 6% and -3%, respectively. EBITA came down 19% y-o-y at SEK 306m (+9% vs. ABGSCe and +3% vs. consensus) on a margin of 11.2% (ABGSCe 10.5%, consensus 11.0%). The margin declined by 180bp, mainly owing to difficult comps for scrubber installations, with sales down 75% y-o-y, resulting in Industrial Process EBITA declining by 42% y-o-y. On a more positive note, end-markets across the group recovered towards the end of Q2, as September was very strong. Overall, net income declined by 24% y-o-y to SEK 181m (ABGSCe SEK 167, consensus SEK 176m).

Continued cost control and acquisition pace are supportive
While market uncertainty remains, Addtech highlighted that Q2 has started on a good note, with the strong September development lasting into October. We raise EBITA estimates by 1-2% for FY’20/21 and FY’21/22. Partly driven by the better than expected Q2 result but more long term, we expect some cost savings during the pandemic to be more permanent, for example, the layoff of 200 employees in the last six months. Despite an uncertain environment, Addtech has managed to close nine acquisitions since the start of the financial year, and together they provide sales of around SEK 775m, which provides a solid platform for growth over the coming 9-12 months.

Share up >50% YTD, trading slightly higher than peer group
The share has been strong since March and is up >50% YTD. Currently, the Addtech share is trading at a ’21/22e forward EV/EBITA of 25x on our updated figures, which is above its core peers (21-23x) and well above its own historical average.


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