Semcon reported Q1 sales of SEK 495m (418m), corresponding to growth of 18% y-o-y. Sales growth was mainly driven by acquisition contributions from Squeed, Tedsys and Walkgrove. Organic growth was 4.4% and FX contributed 2.9%. Adj. EBIT was SEK 65m (46m), equal to an adj. EBIT margin of 13.2% (11%). The y-o-y margin improvement was driven by EDS whereas PI continued to perform on a high level with an EBIT margin of 16.2% (16.6%). Sales were 3% below ABGSCe (mainly on lower organic growth) but adj. EBIT was 15% above as the profitability in EDS was clearly ahead of our expectations. Semcon acquired Goodpoint on the last day of the quarter, yet the net cash position is still healthy at SEK 235m (259m), meaning there is room for additional M&A should the company find any interesting opportunities.
Raised margin assumptions, ’22-‘23e EBIT up 5-4%
Our revisions mainly stem from the deviations in the Q1 report; we lower sales slightly but raise our EBIT margin assumptions for EDS. We are rather cautious to extrapolate the Q1 profitability, however, as our calculations suggest that ~6pp of the 6.6% organic growth in EDS was from price/utilization. This is higher than normal and probably a consequence of the higher inflation in 2022, but wage increases are being implemented from April so we believe it will be harder to raise profitability in Q2. Overall, we raise ’22-‘23e EBIT by 5-3.7%.
Unchanged fair-value range of SEK 115-164
Despite our positive revisions we keep our fair-value range intact at SEK 115-164 as peer multiples have contracted since our last update. We are encouraged by the organic growth in EDS and by Semcon increasing its M&A agenda during the last year. Demand seems to be holding up despite the situation in Ukraine, which is why we believe the company is in a good positi ...
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