We expect Q4 sales of SEK 19.4m, up 7% y-o-y, gross profit after variable costs of SEK 7.8m (40% margin vs. 41% in Q4’20) and EBIT of SEK -9.8m (-51% margin vs. -51% in Q4’20). In Functional Wood (FW), we expect a y-o-y decline in sales (-10%) since high wood prices have led customers to not stock up as usual during Q4. However, due to the company now having renegotiated most of its contracts in FW to account for raw material price hikes, we expect a return to normal gross margins in Q4. For Green Coatings & Maintenance (GCM), we expect continued strong growth (+25%), driven by growth in OrganoTex sales. Within Non-woven & Technical Textiles (NWT), we expected a contract to be signed prior to year-end 2021, but there have been some delays on this front. Management says that there are still three contract negotiations in “late-stage” phase, i.e. the same information that was given prior to year-end 2021. They reiterate that despite the delay no contract has been lost.
’21e-’23e sales estimates lowered on NWT and FW revisions
We lower our sales estimates by 4%, 8% and 2% for ’21e, ’22e and ’23e on estimate revisions in FW and NWT. In FW, we expect lower demand to persist during H1’22e, but this should create pent-up demand going into H2’22e. In NWT, we postpone sales to factor in the delayed timeline, now accounting for one new contract in Q1’22, one in mid-22 and one at some point during ’23.
Assessing the potential value of three new NWT contracts
Following our negative estimate revisions, we lower our fair value range to SEK 4-14 (5-15) per share. While the mentioned contract delays in NWT are of course a negative, we do not see them affecting the total sales potential of the segment, only the ramp-up timeline. As such, we have conducted a valuation exercise (see inside) where we look at the p
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