A lot of things are going in within Semcon at the moment. Firstly, we expect an update on the potential public listing of the Product Information (PI) business area, as per earlier guidance from the company. With that in mind, it was not optimal timing that a current customer in the UK decided to reduce its business volume with PI starting from 2022. This will have a negative impact of GBP 0.8-1.1m for 2022. Secondly, two new acquisitions have been announced: Tedsys and Walkgrove. The former is a Swedish IT company based in Malmö that will strengthen the geographical presence of the EDS business area. The latter is a UK-based company focused on digital learning. For the ongoing business operations, we expect solid demand and for organic growth to accelerate from a rather muted Q3 that faced issues with higher-than-normal employee turnover. For Q4, we forecast sales growth of 19% (-18%), organic growth of 8% (-18%) and an adj. EBIT margin of 10.5% (10.4%).
Includes two new acquisitions and a volume reduction
We have included the two new acquisitions in our estimates, but these are offset by the reduction of business volume from a current automotive customer within PI. In total, this leads to a 1.2% revision for 2022 sales and a -1.6% revision for EBIT.
Revenue mix is improving even more
As Semcon continues to demonstrate its M&A capabilities, our new fair-value range is derived from a blend of P/E and EV/EBIT valuations vs. key peers (we previously derived it solely from P/E). Therefore, our FV range of SEK 115-165 remains relatively intact despite a de-rating for key peers since our latest update. With the loss of automotive revenues in PI and the two new acquisitions, the revenue mix is improving, with less exposure to the automotive sector.
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