Niloern reported another impressively strong quarter, growing sales by 38% y-o-y (29% organic), to SEK 242m (+39% vs. ABGSCe). The main drivers of the growth were: 1) strong bounce-back among retail customers, 2) scaling well from its production facilities, particularly in Portugal and Bangladesh, and 3) increased volumes from new customers. We had feared that Niloern would suffer more from the COVID-related lockdowns in China, potentially hampering its production capacity and thus sales. However, Niloern impressed us by being able to re-direct parts of its China-related production by, e.g., shipping directly from vendors instead and also moving parts of the production to its facilities in Portugal. Furthermore, despite new hirings resulting in increased personnel costs, the sales growth had a smooth drop-through to earnings, yielding an operating margin of 16.6% (+1.2pp y-o-y and +7.3pp vs. ABGSCe).
Delivering on strong order bookings playing a key role
The strong order bookings continued into Q1, increasing by 58%. In our view, delivering on the order intake will be crucial for continued growth and for Niloern to gain market share. Although management said that the outlook regarding prolonged lockdowns in China naturally poses a potential threat, the Q1 report added confidence in Niloern’s ability to solve such issues. We raise ‘22e-‘24e sales by 10% from today’s report as we now feel more confident that Niloern will be able to deliver on its order bookings while growing across all of its markets and customer groups. Lastly, we lift ‘22e EBIT by ~40% and ‘23e-‘24e by ~30%, as we assume the increased operational leverage we have seen in the recent quarters will continue, thus producing higher operating margins.
Share trading at EV/EBIT adj. of 11.1x-8.9x in ‘22e-‘24e On our updated estimates, the Niloern ...
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