The Q2 report came in above our sales and earnings expectations. Sales grew by +3% y-o-y (of which +2% org. growth y-o-y, vs. ABGSCe 0%) to SEK 918m (+3% vs. ABGSCe). Adj. EBIT came in at SEK 22m (+18% vs. ABGSCe). The adj. gross margin of 28.9% was better than our estimated 27.0%, due to a better product mix and price management. Cash flow from operations of SEK -19m (vs. ABGSCe -80m) was once again much better than we had anticipated, as the company appears to have a more nimble approach to working capital management than we had previously assessed.
Thoughts and outlook
Midsona's operational turn-around continues to exceed expectations. The beat is broad-based, as all segments continue to improve. With an improved gross margin, and a higher quality topline, the company's financial targets should be perceived as more credible than before. Leverage is within the company's targeted range, but we re-iterate that there is likely more work to be done before capital allocation opportunities arise. Finally, the company continues to assess that there will be additional improvements during the rest of 2024, and in our view, this quarter certainly corroborates that thesis.
Cons. EBIT estimate revisions likely slightly positive
The share, which is up ~33% YTD, is trading at ~12x '24e EV/EBITA on our unrevised estimates. A mechanical calculation suggests that consensus' adj. EBIT estimates for '24e-'26e could come up by low single-digits. The company will host a presentation of the Q2 report at CET 11.00.
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