Svedbergs’ Q1 report came in well above our expectations on both sales and EBITA. Sales grew by 142% y-o-y, to SEK 488m (+21% vs ABGSCe), including organic growth of 13%. As we expected, Roper Rhodes was the main driver behind the growth, constituting ~53% of group sales, and performing above our estimates. Furthermore, and also in line with our expectations, that subsidiary weighed on the gross margin, which thus contracted 2.4pp y-o-y to 41%. In contrast, EBITA increased by 156% y-o-y to SEK 73m, yielding a margin of 15% (+1.2pp vs ABGSCe), in line with the group’s financial target. The main reasons for the profitability improvement were: 1) the integration of Roper Rhodes, with its above-group EBITA-margin, 2) successful price hikes offsetting cost inflation, 3) scaling well from in-house production, and 4) successful product launches generating volumes.
…coupled with a solid market seems reassuring
Although we expected Svedbergs to perform relatively well thanks to its vast share of in-house production and support from a growing underlying market, the Q1 report confirmed that the company is holding up significantly better than anticipated. This seems to primarily be an effect of successful price hikes offsetting surging cost inflation (which management mentioned it will continue with) combined with Svedbergs being able to meet demand. We are particularly impressed by the latter, as many other companies have struggled with delivery disruptions. On the back of this, coupled with Q1 deviations and Roper Rhodes growing above expectations, we increase our ’22e-’24e sales by 5-6%. We also lift EBITA by ~7% for ’22e and by ~8-9% for ’23e-’24e on higher EBITA margin assumptions as we expect Roper Rhodes to contribute with more effective operational leverage.
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