Midsona: Macro plays good crop, bad crop - ABG

Macro indicators starting to turn in favour of Midsona'23e-'24e EBIT up 7-4%Trading at '23e EV/EBITA 7.4xCPI-PPI gap has narrowedThe CPI-PPI gap is stabilising, and the October data indicate that Midsona's first month of Q4 in Division Nordics could be better than we anticipated. Indeed, the gap has slightly widened versus September, but the gap had widened for five months in a row only to seemingly stabilise in October. We do not increase our Q4'22 estimates, since the company will be able to pass on price increases starting in Q1'23e, but we raise our sales and EBIT estimates for '23e by 1% and 7%, and by 1% and 4% for '24e, respectively. We are thus increasingly convinced that a positive margin swing is on the horizon.Financial position post-issueThe company communicated during the Q3 conference call that the ambition is to maintain a cash position of c. 15% of sales to have ample liquidity. Following the rights issue, we anticipate that the net debt / adj. EBITDA is approx 3.5x, and that the company can deleverage the balance sheet to below 2x by the end of '23e. These two metrics together would indicate that Midsona could be in a position to selectively make acquisitions at the beginning of 2024 at the earliest. However, it is our understanding that the management team's current focus lies on a turnaround of the present situation rather than actively scouting for acquisitions.Implied valuationBased on our revised estimates, Midsona is trading at '23e EV/EBITA of 7.4x. We note that this is ~40% below the 5-year median.Läs mer på ABG Sundal Collier