EBITA up 5% on solid margin of 14.4% (ABGSCe 13.2%)

End-markets recovering towards more normal levels

Acquisition outlook remains favorable

Solid quarter with supportive restructuring and cost control
Lagercrantz Q2 sales came in at SEK 918m (-1% vs. ABGSCe SEK 923m and -2% vs. consensus SEK 938m). Organic growth was -5% (ABGSCe -3%). M&A and FX contributed +2% and -2% to sales, respectively. EBITA was better than expected at SEK 132m (+8% vs. ABGSCe and cons.), on a solid margin of 14.4% (ABGSCe 13.2%). The strong margin reflects the results of ongoing restructuring and the phasing-out of unprofitable businesses. The impact from the pandemic was mixed across business units; there was a substantial negative impact on a few businesses, such as Asept, but several of the group’s largest business units, e.g. Elpress and R-Con, performed strongly in Q2.

Long-term estimates intact with solid recovery into ’21e/’22e
We raise our EBITA estimates for FY’20/’21e by 2% as a result of the Q2 result and fine-tuned H2’20/’21e figures. We leave our long-term estimates largely unchanged, however. The estimates already reflect a solid recovery as we head into ’21e, and we estimate margins to increase on the back of a higher portion of proprietary product sales; currently 63% of sales (the target is 75% of group sales). It is worth highlighting that acquisitions could provide a boost to estimates, the report mentions that processes that were paused during spring as a result of the pandemic have now been revisited, and we assess the likelihood of acquisitions during the ongoing quarter to be quite high. Over the last 12 months, Lagercrantz has acquired seven business units, which together add around SEK 220m to group sales.

At 21x ’21e EV/EBITA the share trades at a discount to peers
The share is up 27% YTD, trading at 21x ’21e EV/EBITA, which is a slight discount to its larger core peers (-14% vs Indutrade, -24% vs Lifco, and -20% vs Addtech. Our view is that Lagercrantz should be able to
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