Bildkälla: Stockfoto

Ferronordic - Continued strong growth in Russian CE - ABG

Strong Q3 expected, Russian CE market still hot
We expect Q3 sales of SEK 1,520m, up 35% y-o-y (+35% org, -2% FX, +2% M&A), and adj. EBIT of SEK 126m for a margin of 8.3% (9.5%). In Q3, the Russian construction equipment (CE) market grew by an impressive 40% y-o-y, which according to the AEB stems from a modernisation trend in the Russian CE fleet. However, we estimate a slight underperformance vs. the market due to: 1) Ferronordic’s tendency to lose some market share when the market is booming and 2) international players likely having a harder time dealing with supply chain issues than local Russian players. That said, Q3 is still looking to be a strong quarter, with further sequential improvement in Contracting Services (CS) with the Norilsk project operating at full capacity while Irkutsk is ramping up. Also, we expect the strong FX headwinds of the previous four quarters to ease.

Raised Equipment and Contracting Services estimates
We increase ’21e-’23e EBIT by 5%, driven by raised estimates for sold CE machines as the Russian CE market continues its strong growth trajectory. Moreover, we raise Contracting Services estimates, factoring in a slight sequential uptick in Q3’21e.

7x ’22e EV/EBIT, fair value of SEK 273-354 (261-338)
The share is up 27% L1M and is now trading at 7x ’22e EV/EBIT on our estimates. Meanwhile, we expect pent-up demand in the Russian CE fleet, along with the “National Projects” infrastructure plan in Russia (continuing until 2024) to help drive a ’20-’23e adj. EBIT CAGR of 28%. The German operations are also scaling up and should contribute positively to group EBIT by ’22e. All in all, we raise our fair value range to SEK 273-354 (261-338) per share, based on a ’22e EV/EBIT range of 6-8x (44-58% below global CE peers).

Finwire / Börsvärlden

Publicerad 05 November 2021, 07:40

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