Ferronordic: Record quarter, despite supply chain issues

Ferronordic reported Q3 sales of SEK 1,661m (+9% vs. ABGSCe SEK 1,520m, +10% vs. Infront cons. SEK 1,512m), up 47% y-o-y. Sales in Germany were in line (-1% vs. ABGSCe) while Russia/CIS saw a beat across all segments, particularly in Contracting Services (CS, +16% vs. ABGSCe), where both the Norilsk and Irkutsk projects are now operating at full capacity. Reported EBIT was SEK 147m (+17% vs. ABGSCe SEK 126m, +10% vs. cons. SEK 134m), which also includes one-offs of SEK -17m, for an adj. EBIT of SEK 164m (+30% vs. ABGSCe 126m, +22% vs. cons. SEK 135m) and a margin of 9.9% (ABGSCe 8.3%, cons. 8.9%). We had expected the company to be more affected by supply chain issues, but Ferronordic dealt with this in part by focusing on importing larger machines, thereby significantly altering the product mix and increasing the average sales price by 41% (in SEK). In our view, this dynamic problem solving is a perfect example of how well managed the company is. Moreover, management reiterates its positive outlook for a continued market recovery in 2022, but at a slower pace than 2021.

On our estimates, the share is trading at 7x ’22e EV/EBIT, offering a lease adj. FCF yield of 3-10% for ’21e-’23e. We raise our fair value range to SEK 290-380 (273-354) per share, based on a 6-8x ’22e EV/EBIT range (44-58% below global CE peers).

Ferronordic: Record quarter, despite supply chain issues - ABG

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Ferronordic: Record quarter, despite supply chain issues - ABG

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