Ferronordic: Better positioned - Nordea

Ferronordic reported an overall encouraging set of Q3 2024 numbers. Sales came in 2% above our expectation, driven mostly by continued strong performance in the US, while earnings were still hampered by pronounced market weakness in Germany, to little surprise (new equipment sales in the region declined by 50% y/y, organically). The company took an inventory writedown of SEK -31m, owing to seemingly fierce pricing competition in the market. We view this as a part of operations, but nonetheless highlight that earnings would be in line with our expectation of SEK 34m if we adjusted adjust for the writedown. We continue to believe that pricing scrutiny in the market will abate somewhat when the market begins to recover. We find the probability of further future writedowns as limited, but they are burdening adjusted EBIT for this year (we lower our estimate by ~40%). We keep our estimates beyond this year largely intact. With some green shoots appearing, we find the case more de-risked and thus raise our valuation range to 8-12x 2025E EBIT, compared with the current peer group median of ~10.5x, which in turn corresponds to SEK 45-68 per share. Marketing material commissioned by Ferronordic.