Q4 report on 28 January

‘21e-‘22e EBIT down 2-1% due to FX

>30% discount to peers on 12x ‘21e EV/EBITA

Q4 expectations
We keep our estimate for organic growth of 0% for Q4’20e, as the recovery for its end-markets has generally kept its positive trajectory q-o-q. We see group sales coming in at SEK 2,768m and EBIT of SEK 152m for the quarter, a c. 4.7% sales decline, y-o-y, driven by FX of -5.2%. However, the sales mix should have a slightly negative effect on margins. Fashion, particularly luxury brands sold through retail, has been weak as a result of the lockdowns in Germany. On the other hand, automotive production has been relatively strong with no prolonged shut-down in conjunction with the holidays. Overall, this leads us to expect an EBITA of SEK 165m for a margin of 6.0% in Q4’20e.

Estimate changes
We have lowered ’21e and ‘22e EBIT by 2% and 1% due to negative FX translation effects (mainly EUR). For ‘20-‘22, we forecast an organic sales CAGR of 5% and an adj. EBITA CAGR of 22%, driven by an EBITA margin expansion from 4.6% to 6.5%. We saw the cost-cutting and improved sales mix having an effect on underlying profitability in 2020, evident in the Q3’20 EBITA margin of 6.8%, and we expect it will continue in ’21, as end-markets return to normal.

12x EV/EBITA ’21e on 22% EBITA CAGR ‘20e-‘22e
The share is trading at a 20% premium to its 2Y avg. valuation at 12x ’21e EV/EBITA, offering a ‘21e 7% lease adj. FCF yield. Despite this premium, it is still at a >30% discount to its peer group, which has an average EV/EBITA of 17x on ‘21e.

research@abgsc.com (Introduce.se)

ABG Sundal Collier - Introduce.se