GARO delivered Q4’21 sales of SEK 370m, 4% ahead of ABGSCe and 3% ahead of Factset consensus. On a segment basis, Electrical Distribution was in line with our forecast, while the Project business and Temporary Power were 13% and 14% better. The key growth driver, E-mobility, was 3% ahead of our estimate. The company stated that component shortages still held back deliveries from meeting the strong demand in the EV charging market, but that deliveries had improved during December, which is promising. The group EBIT was SEK 57.7m, 1% above ABGSCe and Factset consensus. The EBIT margin of 15.6% was slightly below ABGSCe at 16.1% and consensus at 15.9%. The company said that investments in marketing in Ireland and the UK, as well as adding resources in Poland, increased costs. Net profit came in at SEK 46.4m, +9% vs. ABGSCe and +8% vs. Factset consensus due to a small positive net financial line (ABGSCe SEK -3m).
Component shortages gradually improving
Looking into ’22, management still sees supply constraints but says they experienced an improvement in December, which appears set to continue into Q1, implying less delivery constraints in H1’22 than in H2’21. The order book is at a good level due to the component shortages with slightly longer than normal lead times. GARO has also announced that it will invest SEK 85m in a new factory in Poland, with building start in Q2’22. This will give GARO increased production capacity to ensure long-term growth, particularly within the E-mobility segment. All in all, we have only made minor forecast changes following the Q4’21 report.
Trading at ~28x and ~23x ’22-‘23e EV/EBIT
We have lowered our fair value range to SEK 170-220 (207-260) due to applying a higher risk premium in our DCF valuation. In our view, the relatively high earnings multiples are justified by GARO’s strong long-term
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