Q4 report due on Monday, 7 February

Estimates raised for VHP, lowered for Medical Solutions

17x ’22e EV/EBITA, 38% gap to compounder median

Q4e: Look for high VHP sales growth to steal the headlines
We expect sales of SEK 3,078m, up 24% y-o-y (+25% organic, 0% M&A, -1% FX). Integrated Solutions should be the stand-out segment in Q4, driven by strong vaporiser heating product (VHP) sales in Integrated Solutions. Nolato has guided for flat or slightly negative q-o-q growth in the segment, implying ~65% y-o-y growth. The Medical and Industrial segments continue to face some issues, however, due to low activity in elective surgeries and component shortages. We expect adj. EBITA of SEK 339m, for a margin of 11.0% (11.4% in Q4’20, 11.2% in Q3’21), with the slight sequential margin decline stemming from a lower margin in Integrated Solutions: management has said that Q3 margins in the segment (13.2%) were abnormally high. Finally, Nolato was subject to an IT intrusion during the quarter, which the company says did not cause any lost revenues but did result in some one-off consultancy costs (ABGSCe SEK -6m, 2% of Q4 group EBITA).

Segment estimates revised, but net effect on group is minor
For Medical Solutions, we lower our EBITA estimates by 5-2% for ’22e-’23e, as we now expect some headwinds in ’22e in elective surgeries due to the outbreak of the Omicron variant. For Integrated Solutions we raise our EBITA estimates by 3% for ’22e-’23e due to the largest customer (active within VHP) continuing its geographic expansion in VHP products. Finally, we expect some FX tailwinds in ’22e. All in all, we lower group adj. EBITA by 1% for ’21e-’22e and raise it by 1% for ’23e.

Valued 38% lower than compounders, same EBITA growth
On our estimates, Nolato trades at 17x ’22e EV/EBITA. This is 38% below the M&A compounder median (at 27x), whereas we expect similar EBITA growth for Nolato (16% ’20-’23e CAGR vs. the compounder median at 15%). However, since we use a relative valuation method for
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