Ferronordic: Not so Nordic anymore - Nordea

Ferronordic will report its Q4 2023 results on 22 February. We expect to see some light at the end of the tunnel, with Q4 being the first breakeven quarter (our estimate: EBIT of SEK -0.7m) since Q3 2022, supported by the acquisition of the US-based Rudd Equipment in November. We argue that Ferronordic's resilience and growth profile will be more attractive as a result. Trading at 2025E EV/EBIT of 8.4x and a 2-7% discount to key peers Finning and MEKO, we believe the newfound US exposure and expected robust incremental operating leverage could warrant a rerating over time; as such, we see a valuation that is closer in line with the peer group average (11.0x), reflected at the upper end of our valuation range. All in all, even though we believe the company will face a tougher market in 2024, we raise our multiples-based fair value range slightly to SEK 68-94 (65-94), implying EV/EBIT of 8-11x for 2025E. Marketing material commissioned by Ferronordic.