Suominen’s Q3 figures fell a lot more than was expected, but the report provided encouraging comments on outlook; performance should improve significantly already in Q4, and we continue to expect about EUR 8m q/q gain in Q4 EBITDA. We estimate the figure at EUR 12.1m, while we see top line grow 2% y/y and close to 15% q/q from the Q3 lows. We expect European revenue to reach new highs, while we see Americas still somewhat down from the peak levels but up 16% q/q. The relatively modest and completed investments in Italy and the US support growth this year, and we expect revenue to surpass the record set in FY ’20, but profitability is unlikely to reach the recent peaks during the next few years.
We expect only marginal profitability improvement from Q4
We find Suominen’s key raw materials prices basically flatlined q/q in Q4; this supports our view according to which incremental margin gains continue from Q4 onwards. USD has strengthened some 5% in the past three months and thus we raise our FY ’22 revenue estimate to EUR 467m (prev. EUR 455m). We continue to expect 6.5% EBIT margin for this year and hence flat absolute profitability, in other words EUR 50.9m in EBITDA. We expect Suominen to loosely guide flat profitability for FY ’22; negative wording seems unlikely considering the softness of Q3’21, while any commitment to positive development appears premature as many key variables remain much in flux.
Peer margins are expected to gain some 200bps in FY ‘22
Suominen’s valuation and estimates haven’t changed much in the past few months. The company continues to trade around 5.5x EV/EBITDA and 9x EV/EBIT on our FY ’21-22 estimates. The FY ’21 multiples are significantly below those of peers because the group is expected to gain some 200bps in FY ‘22 EBIT margin. Meanwhile we estimate Suominen’s FY ’22 EBIT margin down a bit due to the high figures seen in early FY ’21. Suominen’s multiples discount narrows this year due to the peers’ earnings accretion. We retain our EUR 6 TP and BUY rating.
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