Svedbergs
Svedbergs - Twice the EBITA on 4% growth (ABG Sundal Collier)
2020-10-23 13:24
Q3 report a strong beat on profitability
Insourcing production a driver
Valuation range up to SEK 19-49 in line with est. changes
Solid sales performance once againSvedbergs continues to show good performance on the top-line, aided by the “staycation” trend. The consumer market continues to be the main driver behind development, while the project end-market segment remains tough. Note the newly announced deal with Bonava, which should help drive growth in the currently lagging project segment by expanding across the company’s geographical channels. We find comfort in the continued strong growth, although we are cautious going into 2021, given that the effect on the numbers from COVID-19 is still unknown. On the positive side, the number of house transactions are showing positive growth figures, which should be supportive going in to next year. On the back of the sales beat, we raise our sales estimates by 1% for ’20-‘22e.
Margin growth was a positive surprise
We were surprised by the high reported margins, as the company was able to essentially double its adj. EBITA margin y-o-y, without any governmental support. The heavy adj. EBITA beat (c. 70% above our estimates) stems from a gross margin that increased 2.5pp y-o-y to 43.9%, which was 2.3pp above our estimates. The gross margin increase stems partly from FX and product mix but mainly from the insourcing of some macro design assortments, which then also enjoyed solid growth. Ahead, the company is facing slight headwinds from increased raw material prices, but will compensate with pricing initiatives during Q1’21. We raise our EBIT for ’21-22e by 5%, due to the continued cost control as well as increased confidence in the margin story.
Value range increased to SEK 19-49 (18-47) on est. revisions
Svedbergs continues to perform well above our expectations. On the back of our estimate changes, we raise our valuation range to SEK 19-49 (18-47) per share. On our updated estimates, the Svedbergs share is trading at an adj. E
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