Q4 report due Tuesday 8 February

We expect a Q4 similar to Q3

Additional M&A could drive growth

Q4 expectations: Another solid quarter
We expect Q3 conditions to have persisted in Q4, with the Product & Solutions segment performing well. Installation Services remains weak, however, due to component shortages. All in all, we estimate sales of SEK 850m, up 11% y-o-y (3% organic + FX and 8% M&A). To our understanding, cost inflation has continued in Q4, but at slightly lower levels compared with Q3. This should be partly offset by NWG’s strong price power, passing on cost increases to customers with only a few weeks delay. Thus we expect the adj. EBIT margin to remain strong in the Product & Solutions segment, at 11.0% (12.5%). In contrast, we assess the Installation Services margin to remain under pressure, at 4.0% (9.3%), due to shortages of installation material delaying installation of roofing felt. All in all, we forecast group adj. EBIT of SEK 66m, corresponding to an adj. EBIT margin of 7.8% (8.4%).

Estimates relatively intact
We leave our estimates relatively unchanged. We expect a ’21e adj. EBIT margin of 10.7%, contracting to 10.1% in ’22e. We anticipate the margin decrease to be driven by Product & Solutions, with that segment’s margin falling from 14.7% in ’21e to 12.3% in ’22e; we see this being partly offset, however, by a recovery in Installation Services (with a margin expanding from 2.8% in ’21e to 6.8% in ’22e). Overall, we forecast a ’21e-’23e sales CAGR of 3%. Due to the expected margin compression, the ’21e-’23e adj. EBIT CAGR becomes negligible at 0%. We do not include any further acquisitions to our estimates, however, which have historically been a substantial driver of growth. According to management, the M&A pipeline is good going into ’22e, leaving room for NWG to add to our estimates through additional M&A.

12x ’22e EV/EBITA, 16% below peers
The share is down 8% YTD and trades at 12x ’22e EV/EBITA, 16% below peers with similar M&A strategies, but ~
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