Stays Fresh is recovering

Revisions made on ViralOff and FX headwind

DCF valuation range SEK 30-48 (30-49)

Q4: Lower GM, FX and integration fees behind EBIT loss
Polygiene reported Q4 net sales as pre-announced at SEK 26.6m (+40% y-o-y). EBIT was SEK -2.4m (-2.2m), adj. EBIT was SEK 0.2m, as Polygiene had M&A related fees of SEK 2.6m in Q4. We expected adj. EBIT of SEK 2.5m, and the deviation was mainly explained by a lower gross margin caused by higher freight costs, as well as a higher FX impact. Operationally, we saw a recovery for Stays Fresh, which was up 3% y-o-y in contrast to a decline of almost 20% for the first nine months of 2020. The business area is benefitting from fewer COVID-19 restrictions, as its customers are preparing for the re-opening by producing apparel for their spring collections. Odor Crunch is also gaining momentum from a low base, and has moved from having a few customers to 23 during 2020. On the other hand, ViralOff saw declining sales q-o-q, whereas we had expected a gradual ramp-up. We think the discrepancy is due to a timing effect, with initial sales of face masks having declined while larger signed orders (Milano Colori, Diesel, Takisada, etc.) have yet to start production.

Adj. pro forma EBIT margin of 22%, excl. synergies
An additional 29 customer agreements were reached in Q4, taking the tally for 2020 to roughly 100 new agreements, where half have started to generate revenues. Addmaster also posted a strong Q4, with external sales of SEK 19.7m for Q4 and SEK 61m for 2020. The adj. pro forma EBIT margin for 2020 was 22% excluding any synergies. We decrease our sales forecast by 3.3% for 2021e due to lower expectations for ViralOff (SEK 87m vs. SEK 100m previously) and a weaker USD. For the EBIT margin, we make a minor adjustment to 24.6% (24.9%), which results in a 4.5% decrease in EBIT for ‘21e.

January sales up 70% y-o-y, incl. Addmaster
2021 has started strongly for Polygiene (and Addmaster), with January sales up 70% y-o-y. Our rev
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