Seafire’s explosive growth journey seems set to have continued in Q1, with total sales growth of 103% y-o-y (97% from the latest five acquisitions not included in the comparable period and 6% organic). We estimate sales of SEK 155m, with the Industry segment being the main contributor to both organic (+8% y-o-y) and acquired (+229% y-o-y) growth. As in previous quarters, we expect cost inflation to continue weighing on margins, although this will be partly offset by additional price increases towards customers. For example, Thor Ahlgren (~12% and ~9% of ’21 pro forma sales and EBITDA, respectively) has high exposure towards stainless steel, whiles Kenpo (~12% and 21% of ’21 pf sales and EBITDA) has exposure towards gas prices. For the latter, run-rate production costs have increased by SEK ~2m p.a. with the y-o-y cost increase of gas, according to management. All in all, we expect an adj. EBITA of SEK 13m, up 140% y-o-y for a margin of 9% (7%). The y-o-y margin rise of 1.4 pp is explained by the margin-accretive acquisitions of Pexymek (Q4’21), Bara Mineraler (Q4’21) and Kenpo (Q1’22).
M&A headroom supports 30% add to ‘22e EBITA…
We lower our ‘22e adj. EBITA estimates by 6% on slightly lower margin assumptions (FY’22e adj. EBITA margins of 12.5% vs. 13.2% previously) due to accelerating cost inflation and continued component shortages. Looking ahead, we expect a ’21-‘24e adj. EBITA CAGR of 62%. With ‘22e ND/EBITDA of 1.9x and assuming expansion to 3.5x, Seafire has headroom to add ~30% to our ‘22e adj. EBITA estimates. In such a scenario, ‘22e EV/EBITA becomes ~11.5x and pf ND/EBITDA, ~2.8x.
…and M&A scenario implies 30% ‘22e-‘26e EBITA CAGR
The share is trading at 13x and 11x ‘22e-‘23e EV/EBITA, respectively. We have constructed a M&A scenario and find that Seafire has the pipeline, organisation and financial ...
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