Q2 did not contain any major surprises, with adj. EBITA 3% below our estimate and in line with FactSet consensus. The main negative deviation was lower sales and margins in the Print & Packaging (PPS) segment, which we consider temporary. Meanwhile, Supply Chain Solutions (SCS) impressed with an adj. EBITA margin of 6.6% (ABGSCe 6.0%), which bodes well for the margin expansion we anticipate on continued efficiency improvements and contributions from acquisitions. Kammac, with its high-margin profile, is operating at far from normalised margins. In this context, the UK market remains soft, but we expect improvements ahead. The solid recovery in Electronics continued, while most of the other customer segments remained sluggish. However, we expect demand to continue to gradually improve, as it appears clear that demand has increased, demonstrated by Elanders' recovery to flat organic growth in Q2 after a period of negative growth. The US market remains weak, but we think this could change quickly, and Elanders is taking measures to improve efficiency. Additionally, the solid cash conversion continued, with OPCF at SEK 516m.
We lower ests. marginally, still see strong H2 earnings growth
We lower 2024e-2026e EBITA by 1-2%, driven by PPS and caution on upcoming quarters. Nonetheless, we continue to forecast strong earnings growth in H2, and see clear earnings upside potential relating to the market recovery, the acquisitions and interest rates.
Attractive valuation and high-potential acquisitions
We find value support at 12x 2024e adj. EBITA. We expect strong earnings growth in the upcoming quarters and are optimistic about contributions from recent acquisitions. Despite higher leverage, we believe the balance sheet remains solid and see good leeway.
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