Sdiptech: Hiked M&A target, as expected, but with additional upside to estimates - Nordea

Sdiptech lifted its M&A-related financial target yesterday evening (14 September), ahead of its CMD. The target increased from SEK 90m in annual EBITA up to SEK 120-150m. We think the hike was partly expected, as an absolute target would imply a decelerating M&A pace (as a percentage of EBITA), and Sdiptech has already surpassed this target YTD by adding SEK 105m in EBITA. This marks a clear signal to the market that M&A will continue at a high pace, which is accentuated by Sdiptech being the only company in our “core compounding” peer group that used more funds (2x) for M&A during 2018-20 than it had available through its FCF. Our current estimates prudently expect SEK ~50m in EBITA per year from future M&A. If Sdiptech achieves its new M&A target, this would provide 9-19% upside to our 2022 EBITA estimate, and 27-43% for 2024E. This is similar, however, to what we wrote in our Q2 rev iew, when we said SEK 800m in M&A firepower could add ~30% to its SEK 430m EBITA* LTM.