Ferronordic: Looking past the headlines - Nordea

Ferronordic's Q4 2023 results were a mixed bag, coming in somewhat below our expectations. However, we argue that the company's long-term outlook has improved thanks to: 1) evidence of solid operational performance in the US business (contributing only one month in the quarter), which should compensate for the weaker markets in Germany and Central Asia (CA) in 2024E; 2) improved margin resilience following a well-needed reorganisation in Germany; and 3) healthy aftermarket demand, up 20% y/y in Germany. While still not having reached breakeven, we believe the inflection point is near and model the segment turning a profit (EBIT) in H2 2024. Trading at 9.0x 2025E EV/EBIT, between key peers Finning and MEKO, we highlight an interesting entry point to an appealing and somewhat de-risked long-term story, following the recent subdued share price performance. We cut our multiples-based fair value range to SEK 61-84 (68-94), despite raising 2025E EBIT by 2%, as a result of the company's changed debt profile following the US acquisition. Marketing material commissioned by Ferronordic.