Q1 report due Friday, 23 April

‘21e EBIT down by 4% due to acquisition costs

11x EV/EBIT ‘21e on 29% EBIT CAGR ’20-‘23e

Q1 expectations
We expect sales growth of 40% (2% organic, 39% M&A, -1% FX) in Q1’21e, mainly driven by the acquisition of 6X International, while a still-hesitant commercial property network market (43% of sales) should weigh on organic growth. We should see a decline of gross margins to c. 27%, a mechanical function of integrating 6X with its ~20% gross margin, compared to Alcadon at c. 30%. However, given 6X’s lower opex, there should be no EBIT margin impact. We estimate EBIT of SEK 13m for a margin of 7%, down 10bp y-o-y, driven by expected acquisition-related costs of SEK 4m. However, we expect the adj. EBIT margin to be up by 200bp y-o-y, largely driven by improved efficiency (new logistics centre) and easy comps as FX tailwinds impacted EBIT by SEK -3.5m Q1’20.

Estimate changes and outlook
We expect the 6X acquisition to add SEK 238m to ‘21e sales, but we estimate a gradual ramp-up and have changed our estimates to reflect this (previously more evenly distributed). We forecast organic growth to pick up to 8-12% in H2, supported by recovering end-markets. Overall, we forecast FY’21 growth of 59% (M&A 51%, organic 7%, 1% FX), with EBIT margins of c. 10%, implying 75% EBIT growth. For ‘22e and ‘23e, we estimate organic sales growth of 8% and 7%, respectively, driven in part by the new German exposure (9% of ‘21e sales, market expected to have 42% CAGR ’20-‘26e). Note that we see the possibility of price increases within raw materials (copper and plastic) hampering margins unless Alcadon can fully transfer increased costs to customers. We think it can, but that it could impact Q2 as price increases are transferred.

Reiterate value range of SEK 30-70 per share
Alcadon is trading at c.11x EV/EBIT ‘22e, in line with its 3Y average and offering a lease-adj. FCF yield of 10%. We see an excellent outlook over the coming years, with 29% EBIT CAGR ’20-’23 and
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