Nolato reported Q3 EBITA 5% above our estimate and 3% above IR consensus. This was driven by a beat across both segments, but most importantly in Medical Solutions, which was 7% above consensus, marking the third consecutive quarter with Medical above a 10% EBITA margin. In our view, this cements that the margin issues from the past two years are now largely behind us. Heading into Q4e, we expect Medical to continue its strong trend, but we expect a slight sequential setback in Engineered Solutions on negative seasonality and weaker automotive sales (~20% of Engineered). This results in estimated Q4 sales of SEK 2,366m, up 5% y-o-y, and an EBITA of SEK 244m, for a margin of 10.3% (7.9%). This puts us 4% above pre-Q4 IR consensus on Q4 EBITA.
Minor revisions, EBITA raised by 1-2%
We make minor positive revisions across both segments, and this results in group-level EBITA upgrades of 1-2% for '24e-'26e.
Valuation roughly in line with historical average
Following our revisions and the +7% share reaction on the Q3 report, the share now trades at 15.0x '25e EV/EBITA, roughly in line with its 5Y historical average f12m EV/EBITA of 15.2x. We note, though, that the past five years have seen the highest quality segment – Medical Solutions – going from roughly one-third of group EBITA to two-thirds.
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