Ferronordic: Fundamentals improving under the hood - ABG
* Q4e: US stable with Germany improving sequentially * U.S. EBIT raised 8% for '26e-'27e following US bolt-on * Trading at 11-7x '26e-'27e EV/EBIT (peers at 16-14x)
ANNONS
Q4e: US stable with Germany improving sequentially
We expect Ferronordic to report Q4 net sales of SEK 1,081m, down 18% y-o-y, due to an inventory sell-off boosting top-line in Q4'24 as well as FX headwinds. We expect adj. EBIT of SEK 26m, rendering a margin of 2.4% (1.5% in Q4'24, 3.5% in Q3'25). Sequentially, we expect growth in Germany to be fairly muted given that PMIs remain sub-50. While we are cautious about extrapolating the Q3 gross margin (ATH 15.6%), we expect margins to remain resilient and operating profit to be broadly flat q-o-q. We expect the U.S. to remain fairly stable, while group-level EBIT comes down q-o-q following a normalisation of corporate overhead from Q3.
Estimates raised on the back of the Housby acquisition
We raise US '26e-'27e EBIT by 8%, mainly following the acquisition of the Housby's heavy equipment asset alongside the expected market recovery, which will be completed on 30 January. Given that it is an asset acquisition, Ferronordic will not inherit any internal corporate costs, since Housby's overhead will be moved to Rudd's HQ in Louisville. This should lead to an immediate margin expansion for Housby's operations. At the group level, we revise EBIT by 10-9% for '26e-'27e. Net profit increases ~21-24% in ’26e–’27e driven by lower net financials.
We consider Ferronordic's display of acquisition capacity to be an unambiguously positive sign. It displays a growing confidence in the balance sheet, and while we believe that the near-term capacity for further bolt-ons is somewhat limited due to leverage (3.9x ND/EBITDA per Q3'25), we see potential for similar acquisitions from a longer-term perspective. Lastly, the share is trading at 11-7x '26e-'27e EV/EBIT, which can be compared to our distributor peer group at 16-15x.
