Midsona’s Q4 report was in line with its profit warning on 13 January. The weak report was margin driven, as the top-line held up vs. expectations. Sales were in line with expectations at SEK 1,012m (+1% vs. ABGSCe, -2% vs. FactSet cons), with the tempo increasing gradually during the quarter. According to the company, sales growth was positive during December and January, and organic growth in January is said to have been “flattish”. While the omicron/delta outbreak is likely to have been one positive factor, we make minor changes to our sales estimates, with FX pushing up our estimates by ~0.5%.
Margin disappoints – EBITDA estimates down c. 15%
The profit warning was fully due to a weak margin, with the gross margin coming down significantly to 24% (-4pp y-o-y). With the current issues in terms of supply, Midsona has been forced to purchase goods at spot prices to secure supply and maintain its customer relationships. This has been detrimental to margins, with EBITDA coming in at SEK 61m, 37% & 39% below ours and cons. expectations, respectively. At an EBITDA margin of 6%, MSONs EBITDA declined by almost 50%. While the weak result can be somewhat described as a one-off, we note that the margin is unlikely to fully recover until Q2, as price increases will be fully implemented in Q2 and a share of the spot price purchased goods are likely to remain in inventory, due to hurt gross margins in Q1. On the back of this, but also a rising EUR/SEK which is hurtful to margins, we lower our EBITDA estimates by c. 15%, accepting a new reality of lower margins for now. On the conf. call, management highlighted the adverse effect should raw material prices come down again, but this is nothing we are prepared to pencil into our estimates before we see it happening.
Trading at an EV/EBITA of 16x-12x in ’22e-’24e On our updated estimates, the MSON
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