Fair value range of SEK 92-136
EBITA margin up from 2% to 12%, 2018-LTM
Prevas is a technology consultancy firm with a focus on product- and production development. The company has a rich history and has been a public company since 1998. Among its larger customers we find companies such as Saab, Ericsson, ABB, Atlas Copco and Sandvik. In descending order, the end-market exposure is Engineering, Life Science, Energy and Defence. During the last couple of years we have seen an impressive transformation, with the EBITA margin going from 2% in 2018 to 12% in the last 12 months. The transformation has been led by current CEO Johan Strid, who joined Prevas in 2018 and initiated a programme of change, tightly focused on decentralisation, empowering employees and creating a network-like organisation. This has led to reduced overheads, increased prices and higher utilisation.
New financial target aims for a 10% sales CAGR
With its profitability at a new, higher level, Prevas decided to set new financial targets at the start of 2022. The targets include a margin target where the EBITA margin shall exceed 10% over time, as well as annual sales growth of at least 10% per year including acquisitions. We are cautious regarding the mid-term outlook, as we have seen leading macro indicators such as the PMIs deteriorating rapidly during Q3. However, we also argue that Prevas should be able to cope well with a potential recession due to two key factors: 1) the end-market exposure, where roughly 30% of sales are generated by the non-cyclical Life Science and Defence markets, and 2) demand for technology consultants is holding up well relative to other service firms according to the latest survey by Almega, the employers’ organisation for the Swedish service sector.
Trading ~35% below key peers on ’22e EV/EBIT
Our fair value range is based on an equal weight average of two different DCF sce ...
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