Q1 report due 08:00 CET 27 April

Expect sales down by 4% y-o-y on challenging comps

13x EV/EBIT ‘22e and 5% lease adj. FCF yield

Q1 expectations
We expect sales of SEK 645m, down 4% y-o-y (-4% organic, -4% FX, +5% M&A). The comps are challenging this quarter, with 18% growth (14% organic) in Q1’20 and positive margins in a seasonally weak quarter. We think this was above-normal activity levels for the waterproofing market and that it will not be repeated in Q1’21e. The weather conditions have been okay in the Nordics, with the exception of Finland (27% of Q1 sales) which experienced a more difficult winter than last year. We expect EBIT of SEK -2m for a margin of c. 0%.

Estimate changes
We increase ’21e-23e sales by ~2% on the back of updated FX and acquisitions announced since our last update. As a result, we estimate 3% sales growth in ‘21e (organic: -1%, M&A: 6%, FX: -2%). We expect an EBITA margin of 9.9% for ‘21e, down from 11.2% in ’20. The margin downtick is due to an exceptionally strong 2020, with tailwinds in both raw materials and demand, which we do not expect to continue. Raw materials prices have already increased, and a majority of raw materials (Bitumen) are hedged at a higher level than in 2020. In additional, lumber prices are up >300% y-o-y which could affect both construction activity and margins in the company’s prefab business. We also expect a reversal to normal of working capital levels to hurt cash flow this year.

M&A growth more important than challenging comps
The Nordic Waterproofing share is up 130% over the last 12 months, but is only trading at 13x EV/EBIT ‘22e and offering 5% lease adj. FCF yield. While we forecast near-term headwinds in the form of challenging comps and raw material prices, we still expect the company can deliver above 10% EBITA growth over time with the help of M&A.

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