Polygiene has some direct effects from the war in Ukraine, as it has business with Russian brands, but we believe this is a small/insignificant share of its total revenues. The company has stopped the delivery to these customers and is prioritising other customers. We are more worried about the indirect effects, such as rising polymer prices and increased stress on the supply chain. The former could lead to lower gross margins and the latter could lead to more delays for certain types of orders being delivered to customers. In the spring, we have also witnessed a surge in COVID-19 cases in Asia, with new lockdowns as a result. This is a worry for Polygiene in terms of supply chain-related issues and from a sales point of view, as it can result in lower demand.
We lower ‘22e EBIT by 6.5%, ‘23e not as affected
With this in mind, we lower ‘22e sales by 2% for ‘22e. We think Polygiene will be able to recover some of the lost sales in ‘23e and ‘24e, as our adjustments stem more from external challenges with supply chain issues rather than an assumed weakness in demand. Also, we lower our gross margin assumptions as the war in Ukraine has put pressure on input costs and supply chains. This leads to cuts to EBIT of 6.5%-2.8% for ‘22e-‘24e.
New fair value range of SEK 34-54 (35-55)
We lower our fair value range slightly to SEK 34-54 (35-55), as we incorporate our new estimates together with slightly lower margin assumptions. The market has been less forgiving, with the Polygiene share down 43% in the last three months. On our revised estimates, the share is trading at a ‘22e P/E of 17x and an EV/EBIT of 13.3x.
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