11x EV/EBIT on '23e trough earnings
Lower volumes, but margin progress in Installation Services
We expect Nordic Waterproofing (NWG) to report Q4 sales of SEK 1,008m, up 13% y-o-y, of which 2% organic (-9% volume, +11% price). Continued low newbuild activity should drive a notable drop in volumes, while latent price hikes from prior quarters offset this effect. The bitumen price is now down >20% (in SEK) from peak levels in June 2022, but is still up y-o-y, and for Products & Solutions we therefore expect an EBIT margin drop to 9.8% (10.9%). For Installation Services, Q4'21 was a particularly weak quarter due to job delays, and we expect a significant improvement to 4.0% (-3.2%), for a group EBIT of SEK 72m and a margin of 7.2% (6.6%). Finally, cash flow should be strong as NWG typically releases working capital in Q4, which management has stated should be the case this year too.
A bit more cautious on '23e, EBIT margin to trough at 9.2%
We make small adjustments to our estimates, lowering FX slightly, consolidating Playgreen Finland Oy (now a majority stake for NWG), and taking a more cautious view on Q4e and '23e margins. This lowers our '23e EBIT by 2%, while our underlying estimates (ex. Playgreen) remain mostly unchanged for '24e. By '24e, we expect normalised market conditions and an uptick in earnings compared to '23e.
Trading at 11x EV/EBIT on '23e trough earnings
Recession fears have weighed on the share lately, but we note that NWG has decent flexibility for proactively adjusting its cost base to lower volumes given the long lead times (and therefore good visibility) in the construction sector. This means that even in a major recession scenario, we still expect okay margins and see limited downside risk to estimates. On estimated trough earnings in '23e, the valuation of 11x EV/EBIT does not look too strained, in our view (5Y avg. 10x).
Läs mer på ABG Sundal Collier
Aktuellt
SENASTE
