Q4’20 figures broadly in line with expectations

MCC and neg. FX hold back positive estimate revisions

Trading at 11x EV/EBITA ’21e, 8-6% FCF yields ’21-’23e

Margins lifted by product mix
VBG Group delivered Q4 sales of SEK 760m (-2% vs. ABGSCe SEK 774m), down 10% y-o-y, -3% organically (ABGSCe -6%). Margins improved across all segments, and group adj. EBITA came in at SEK 94m (+4% vs. ABGSCe SEK 91m), for a margin of 12.4% (ABGSCe 11.7%, 8.8% in Q4’19). Even when excluding the government support of SEK 8m in Q4, the margin was up 2.5% y-o-y. RPT delivered an impressive quarter with strong margins; sales came in -15% y-o-y but EBITA increased to SEK 21m (SEK 12m), for a healthy margin of 19.0% (9.2%). The margin uptick in T&TE, which reached 20.6% (16%), was driven by high demand, a good product mix, high capacity utilisation in production, and continued tight cost control. MCC is still under pressure from the pandemic: EBITA came down by -17%, for a margin of 5.4%, held back by lower demand within trucks in NA and a one-off cost of SEK 4m. Finally, the Board proposed a dividend of SEK 4.50 (ABGSCe 4.60), corresponding to a payout ratio of c. 50%.

Momentum to continue, but muted by FX and MCC
Our estimates still reflect a recovery in group sales, with margins supported by tight cost control and better demand in T&TE and RPT. However, we see margin improvements being diluted by MCC’s issues with its weak end-markets and by FX headwinds (-4% FX impact on ‘21e-‘22e earnings). Overall, we lower adj. EBITA by 2% for ‘21e and by 6% for ‘22e.

Trading at 11x EV/EBITA ’21e, 8-6% FCF yields ’21e-’23e
On our estimates, the share is trading at 11x EV/EBITA ’21e, c. -12% below its 5Y historical average while offering c. 8-6% FCF yield ’21e-’23e and ~6% adj. EBITA CAGR ’20-’23e. Management highlighted that M&A is on the agenda for RPT and T&TE. Combined with a healthy balance sheet, we see plenty of room for value-creative M&A.

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