We expect sales of SEK 1,636m, up 38% y-o-y (+28% organic, +6% FX, +4% M&A). The Russian construction equipment (CE) market continued its strong momentum in Q4 (up 49% in units), according to AEB. However, we note that Ferronordic 1) tends to be more stable than the market, and thereby underperforms when the market is hot, and 2) should be more affected than local Russian actors by supply chain issues. As such, Ferronordic will likely not keep up with the rapid market growth in the quarter, although in the Contracting Services segment, y-o-y growth should be high since the two main projects in the segment were still ramping up in Q4’20. We expect EBIT of SEK 139m, for a margin of 8.5% (5.5%), with Germany still contributing negatively to group EBIT. This includes estimated one-off restructuring costs from the new German acquisitions of SEK 3m.
Margins lowered, but current RUB rate bodes well for ’22e
We lower our adj. EBIT estimates 3-1% as we revise our margin estimates, accounting for continued struggles from component issues. We raise sales somewhat, however, which is mostly from FX as the recent RUB rebound would imply a positive FX effect of ~4% in ’22e at current rates. We lower our fair value range to SEK 230-310 (290-380) per share, following our estimate revisions and higher perceived risk.
Higher geopolitical risk, but how is Ferronordic affected?
Having summarised our Q4 expectations, let’s talk about the elephant in the room: political risk. The share is down 34% YTD following escalating tensions between Russia and the West. To our understanding, nothing has transpired so far that directly affects Ferronordic’s operations, but there is a looming threat that Russia may be sanctioned by the West should tensions escalate further. In fact, we saw a similar situation in 2015, when Russia faced sanctions
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