Telko already achieved long-term margin targets
Telko’s recent working capital management and pricing control measures have already produced significant results in cash conversion cycle, and there remains some more room for improvement relative to certain benchmarks. Telko now has established the lubricants business besides the plastics and chemicals ones. We believe lubricants is an area that can deliver more good results in the long-term as the business is still quite small relative to plastics and chemicals. We see Telko’s reinforced core is now better positioned to capture profitable volumes. Telko has indeed already managed to top the 6% EBIT margin target during the last two quarters. Leipurin however is yet to deliver gains towards its 5% EBIT margin target.
Significant EBIT improvement appears possible next year
Although the long-term financial target confirmation is good news as such focus nevertheless remains on more short-term profitability development. Our TP is now EUR 8.00 (7.25); we retain our BUY rating since profitability continues to improve and SOTP valuation supports further upside potential.
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