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Nolato: Solid growth held back by temporary costs - ABG

Q3 report due on Thursday, 28 October
EBITA down from headwinds in Medical and Industrial
18x ’22e EV/EBITA, 33% gap to compounder median

We expect Q3 sales of SEK 2,988m, up 20% y-o-y (11% org, 12% M&A, -3% FX) and an adj. EBITA of SEK 329m, for a margin of 11.0% (12.2%). We estimate Q3 should be a somewhat weaker quarter for Medical Solutions (-5% organic growth) and Industrial Solutions (-4% organic growth) due to continued low activity within elective surgeries as well as supply chain disruptions. However, Integrated Solutions will likely continue to shine, with the segment expected to report organic growth of 30%, driven by strong performance in vaporiser heating products (VHP). Our current estimates are in line with the Q3 performance update released by Nolato on Friday, 1 October, and while the group EBITA margin looks to be below what we had previously estimated (11.9%), the deviation is not substantial.

We expect Nolato to deliver a ’20-’23e EBITA CAGR of 15%, 1.5pp above the expected median for M&A compounders. Meanwhile, Nolato is trading at 18x ’22e EV/EBITA, 33% below the compounder median. Despite the company’s lowered figures for Q3, we retain a positive view of Nolato’s prospects, driven by strong organic growth in both Medical Solutions and Integrated Solutions.
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