10x ’22e EV/EBITA (adj.), 13-16% ’22e-’24e FCF yield
High paper prices and cheaper transportation a poor mix
We expect Elanders to report Q3 sales of SEK 3.5bn, up 21% y-o-y (+3% organic, +13% M&A, +5% FX), helped by a material SEK decline and, to our understanding, another solid quarter for Bergen Logistics. We expect an adj. EBITA of SEK 199m, for a margin of 5.7% (4.4% in Q3’21, 6.4% in Q2’22). The q-o-q margin decline is primarily due to Supply Chain Solutions (SCS), where we see high input costs and declining freight rates, resulting in an 80bps decline in Q3 to 6.5%. In Print & Packaging Solutions (PPS), we expect flat margin development q-o-q, at 3.3%, i.e. continued low levels. Paper prices remain elevated, with paper producers forced to keep prices high having been hit by extreme energy costs, thereby creating a risk of prolonged margin pressure in PPS.
Positive FX effect offsets slightly lowered margins
We raise our sales estimates, partly on positive FX effects. Also, we take a somewhat more cautious approach to margins. For PPS, this is driven by continued high paper prices, which we previously believed would come down slightly towards H2’22. For SCS, margin-accretive growth in Bergen should hold up profitability fairly well, but declining freight rates will likely have a negative effect, particularly on LGI Logistics, which has a heavy exposure to air & sea freight. All in all, we raise our top-line estimates by 2-4%, but adj. EBITA only comes up by 1-3% on our lowered margin estimates.
10x ’22e EV/EBITA with 13-16% ’22e’24e lease adj. FCF yield
On our current estimates, the share is trading at 10x EV/EBITA (adj.), or 8x lease adj. EV/EBITA, offering 13-16% lease adj. FCF yields for ’22e-’24e. We do see some risk of prolonged margin pressure in PPS due to paper producers struggling with high energy prices, as well as fears of lower demand on a general economic slowdow ...
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