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Nilörngruppen
Nilörngruppen - Strong beat, but uncertainties remain (ABG Sundal Collier)
2021-10-22 17:43
Q3: a double-digit beat vs. ABGSC EBIT expectations
Expect a slight gross margin contraction in ‘22e
Share is trading at EV/EBIT 8.7x-9.4x for ‘21e-‘23e
Q3 report in briefNilörngruppen delivered a strong beat versus our expectations in Q3. Sales grew 38% y-o-y to SEK 203m, 28% above our estimate. The sharp increase in sales resulted in EBIT of SEK 29m, corresponding to growth of 43% y-o-y and 74% above our expectation of SEK 17m. The rise in sales is primarily driven by: 1) continued tailwinds among sports and e-commerce customers, 2) an upswing in the brick-and-mortar customer base from H1’21 due to eased pandemic restrictions (primarily in England and Germany), and 3) increased efficiency in the production plants. Furthermore, increased production capacity provided support to the group’s gross margin and partially offset the negative effects from energy shortages in China and increased freight costs. In all, the gross margin contracted by 1.2pp but expanded by 0.9pp from 2019’s level to 45.7% (-0.8pp vs ABGSCe).
Low-single digit upward estimate revisions on ‘22e-‘23e
The Q3 report confirmed our outlook that Nilörngruppen is set to capture the possibilities arising from post-pandemic re-openings. However, the company has lost a couple of large customers in Q3, which we believe could become visible in H1’22e. Considering that we do not yet know the extent of the customer loss and its impact, we cautiously raise our sales estimates by 2% and our EBIT estimates by 2-3% for ‘22e-‘23e. Additionally, we forecast a slight gross margin contraction in ‘22e due to supply chain-related uncertainties that could hamper short-term margins. Finally, we raise our sales and EBIT estimates for ‘21e by 6% and 14%, respectively, mainly due to the Q3 deviations.
Valuation: trading at 8.7x-9.4x for ’21-‘23e
On the aforementioned estimate revisions, the Nilörngruppen share is trading at an EV/EBIT adj. of 8.7x-9.4x for ‘21e-‘23e. For comparison, its significant larger peer, Av
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