* More margin gains, 12% target now looking conservative * Adj. EBITA raised by 1-2% for '25e-'27e, mainly from Engineered * Trading at 14.5x '26e EV/EBITA vs. five-year average 15.3x More margin gains, 12% target now looking conservative Nolato reported a solid set of numbers, with adj. EBITA 2% above Modular Finance IR consensus. The beat was driven by Engineered Solutions, while Medical Solutions came in below expectations. This marked the fourth consecutive quarter of margin expansion, and at an 11.7% adj. EBITA margin, Nolato is now closing in on its 12% target that was introduced as recently as March 2025. We argue that the target, which seemed ambitious a couple of quarters ago, is now starting to look conservative, as we see several avenues for further improvement. These include: 1) the ramp-up of volumes from the new Hungary site starting Q2'26e, which management has said will be margin-accretive to the Medical segment, 2) a recovery in the high-margin materials sub-segment driving positive mix effects, and 3) improvements in the still-underperforming US Medical business. Adj. EBITA raised by 1-2%, driven by Engineered Engineered cleared our Q3 margin estimate by some distance, and we do not think the underlying drivers are temporary, so we raise the segment's EBITA estimates by 5-7%. Meanwhile, our 1% EBITA cuts in Medical are explained by updated FX assumptions, while our revisions amount to +1-2% on EBITA for '25e-'27e at the group level. 14.5x '26e EV/EBITA, slightly below 5Y average 15.3x On our estimates, the share is now trading at 14.5x '26e EV/EBITA, slightly below its five-year average of 15.3x, offering '26e-'27e lease adj. FCF yields of 5% per year. We also highlight that the higher-quality Medical segment has gone from 34% of EBITA to 59% during the past five years.
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