Q4 report due Tuesday, 22 February

M&A headroom to add ~60% to ‘22e EBITDA

Fair value range raised to SEK 90-120 (45-90)

Q4 expectations: High growth but increasing costs
We expect sales of SEK 202m, up 82% y-o-y (6% organic, 1% FX and 75% M&A) in Q4’21e, with the rise mainly driven by: 1) the acquisition of 6X International, adding SEK ~80m to sales and 2) relatively easy comps (-5% organic Q4’20) supporting organic growth. We estimate adj. EBIT of SEK 18m, corresponding to an adj. EBIT margin of 8.8% (8.5%), down 0.7 pp q-o-q. We fear that the market situations in Denmark and especially Germany have remained challenging during the quarter due to the pandemic, pushing deliveries into ‘22e. Despite delays, we expect Alcadon to have continued scaling up its organisation in Germany as planned, thus increasing costs faster than volumes and explaining the q-o-q margin drop.

Estimates slightly down, significant M&A headroom
We lower our ‘21e-‘22e adj. EBIT estimates by 7% on higher cost assumptions. Additionally, ‘22e-‘23e EPS is cut by 13-7% due to the new share issue in Q1’22. We estimate ‘22e ND/EBITDA of -0.6x following the issue, which added SEK 128m before transaction costs. As such, Alcadon has acquisition headroom to add ~60% to our ‘22e EBITDA estimates (assuming 2.5x leverage), allowing for upside to our estimates.

CMD confirmed and new financial targets expected
Alcadon is trading at 17x ‘22e EV/EBIT with a 36% ‘21e-‘23e adj. EBIT CAGR. CEO Mirborn recently announced plans for an upcoming CMD this year and we think it is likely that updated financial targets will be presented at the CMD to better reflect the new geographic exposure, improved organic growth opportunities and M&A agenda. Alcadon’s current financial growth target is EPS growth of 10% p.a. over a business cycle. We expect the new financial growth target to include acquired growth and be raised to 15-20% annual EBIT growth. This would be in line with other acquisition-driven companies, and the upper bo
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