Despite supply chain constraints and cost inflation, we expect NWG to start ‘22e with a solid quarter. Q1 is usually seasonally small, and we estimate it to contribute 21% and 7% to FY‘22e sales and adj. EBIT, respectively. We expect organic growth of 10% (2%) in Q1, driven by price increases of ~12-14% within Products & Solutions (P&S) during the last year, whereas volumes should be stable. All in all, we forecast sales of SEK 853m, up 21% y-o-y (10% org, 4% FX and M&A 7%). We believe that NWG has continued offsetting cost inflation with price increases, thus defending a relatively high margin of 7.8% (8.7%) in P&S, whereas we expect profitability in the Installation & Services segment to remain depressed at -10.0% (-10.5%). With slight operational leverage on group costs, we forecast the group margin to remain on par y-o-y at 3.1%.
Comp. shortage may worsen, but NWG seems set to manage
Following additional price increases, we raise our ‘22e-‘24e sales estimates by 3%, respectively. On relatively intact profitability assumptions, ‘22e-‘24e adj. EBIT estimates rise by 2-3%. Despite the higher estimates, we acknowledge the low estimate visibility. For example, we think the component shortage could accelerate in Q2e. NWG’s largest bitumen supplier in Finland and Sweden, Nynäs (accounting for ~60% of bitumen supply), which recently completed its reconstruction, announced that it will stop importing from Russia and replace it with other sources. We understand that this could potentially cause temporary delivery issues for Nynäs in Q2e. Although NWG has other sourcing options, bitumen can only be stored for ~1 week, preventing inventory build-up. All in all, NWG seems fairly confident that the potential impact should be manageable, if in fact it is an issue at all.
10.8x f12m EV/EBITA, slightly above L5Y avg. The share is ...
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