Equity Research - 26 October 2018 20:39 CET · 26 October 2018 ABG Sundal Collier 4 Forecast...

Please refer to important disclosures at the end of this report This research product is commissioned and paid for by the company covered in this report. As such, this report is deemed to

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Nolato

Reason: Post-results comment

Cautious about heating; is it that bad?

Organic sales growth 4% vs. ABGSCe 5%, EBITA in line

Medical positive surprises but not Industrial

Value of heating products from 62% to 24% of Mcap

EBITA in line but mixed performance by segments

In Q3’18 organic growth was 4% vs. ABGSCe 5%. On segments,

Medical continues to show impressive growth (+22% organic growth vs.

ABGSCe 7%) while Integrated was weaker with -6% vs. ABGSCe +6%.

Industrial was in line on 2% (ABGSCe +1%) on harsh comps. Adj. Group

EBITA was 222m (0% deviation vs. ABGSCe 222m), on margins of

11.2% vs. ABGSCe 11.5%. Lower margins stemmed from Industrial due

to unsatisfactory efficiency in the automotive area (probably related to

the recent high volumes). We note that overall demand is strong, despite

inventory adjustment for heating products.

Lower volumes in Integrated, still small estimate changes

Guidance was lowered for heating products in Q4’18. We cut sales

slightly which, together with weaker telecom, boils down to -8% for

Integrated Solutions in Q4’18e (from -2%). As mentioned in our preview,

there are signs of slower demand in Japan for tobacco heating products.

However, the main message is that we do not find evidence for big cuts

in ’19 estimates. We think that Q1’19 and particularly Q2’19 could be

challenging on tough launch volumes comps but that demand in H2’19

should leave ’19e sales just slightly below ’18e (-2.5% growth from

+1.2%). Additionally, 1) price pressure is not evident, and 2) ROIC is on

high levels; it is a profitable product area. Looking ahead, it is clear that

“next generation products” is a growth/focus area for the product owner.

Also, new products are under development where it is fair to assume that

Nolato will remain the production partner.

Heating products share of the value has fallen substantially

The EV/EBIT ’19e is 11x. We assess that the market assigns a value of

SEK 2.5bn to heating products (25% of MCap), implying 1.0x EV/sales

for the business area. Three months ago, we put the figure at SEK

12.5bn (60% of MCap at the time) and EV/sales 4.9x.

25/10/2018

Performance

Equity Research - 26 October 2018 20:39 CET

SEKm 2016 2017 2018e 2019e 2020e

Sales 4,447 6,720 8,271 8,361 8,696

EBITDA 636 980 1,194 1,194 1,243

EBITDA margin (%) 14.3 14.6 14.4 14.3 14.3

EBIT adj 443 749 942 944 985

EBIT adj margin (%) 10.0 11.1 11.4 11.3 11.3

Pretax profit 438 731 922 920 961

EPS rep 12.77 21.74 27.49 27.30 28.53

EPS adj 13.30 22.27 27.71 27.43 28.78

Sales growth (%) -5.9 51.1 23.1 1.1 4.0

EPS growth (%) -20.0 70.2 26.5 -0.7 4.5

Source: ABG Sundal Collier, Company data

Lead analyst: Johan Nilsson Wall

Estimate changes (%)

2018e 2019e 2020e

Sales 0.5% -0.6% -0.9%

EBIT (rep) -2.5% -0.6% -0.9%

EPS (rep) -2.2% 0.7% 0.5%

Source: ABG Sundal Collier

Share price (SEK) 393.0

Communications Equipment, Sweden

NOLAb.ST/NOLAB SS

MCap (SEKm) 10,395

MCap (EURm) 1,002.1

Net debt (EURm) -1

No. of shares (m) 26.4

Free float (%) 100.0

Av. daily volume (k) 532.3

Next event Q4 report: 12 Feb

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Nolato OMX STH PI

1m 3m 12m

Absolute (%) -29.4 -51.0 -6.1

OMX STH PI (%) -9.9 -6.5 -6.1

Source: FactSet

2018e 2019e 2020e

P/E (x) 14.3 14.4 13.8

P/E adj (x) 14.2 14.3 13.7

P/BVPS (x) 4.02 3.49 3.07

EV/EBITDA (x) 8.7 8.5 8.0

EV/EBIT adj (x) 11.0 10.8 10.1

EV/sales (x) 1.26 1.22 1.15

ROE adj (%) 30.9 26.1 23.9

Dividend yield (%) 3.2 3.3 3.3

FCF yield (%) 5.0 4.9 5.4

Net IB debt/EBITDA -0.0 -0.2 -0.3

Nolato

26 October 2018 ABG Sundal Collier 2

Geographical breakdown, sales, SEKm


Business area breakdown, sales, SEKm


EPS estimate changes, 2018e, SEK

Source: ABG Sundal Collier, FactSet

EPS estimate changes, 2019e, SEK

Source: ABG Sundal Collier, FactSet

Quarterly sales and adj. EBIT, SEKm


OpportunitiesEconomic and business cycle fluctuations. As a

subcontractor Nolato is highly dependent on customers’

decisions and commercial performance such as postponed

or cancelled projects or product life spans.

RisksAttracting new customers in growth areas as seen in VHP

(Vaporiser Heating Products). As customers’ volume

prospers so does Nolato’s. Owing to its wide-ranging

expertise across different areas of technology, many

industries and niches are potential customers. Also, value-

added acquisitions are opportunities on the back of a very

solid balance sheet and high cash conversion.

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Sweden Rest of Europé Asia North America andOthers

Sales

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Medical Solutions IntegratedSolutions

Industrial Solutions

Sales

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ABGSC FactSet Consensus Mean

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ABGSC FactSet Consensus Mean

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quarterly sales quarterly adj. EBIT

Company descriptionNolato develops and manufactures products in polymer

materials such as plastic, silicone and TPE for leading

customers within medical technology, pharmaceuticals,

consumer electronics, telecom, automotive and other

selected industrial sectors. Over the years Nolato has

strengthened its strategic move from being a manufacturer

of components to customer specification to being a

solutions-oriented advanced partner for its customers.

Sales were SEK 6.7bn in 2017 with an EBITA margin of

11.5%. Nolato has a global presence with only 18% of

sales from Sweden.

Nolato


Adj. EBITA in line, but adj. margin 0.5pp lower

Source: ABG Sundal Collier, company data

Positive deviation on total sales of 3.9% was derived from stronger than expected FX. Organic growth of 4% was

just a touch lower than our expectation of 5%. Adjusted for EO-costs of SEK 17m, adj. EBITA was SEK 222m, in-

line with estimates. Adj. EBITA margin of 11.2% was lower than our expectations of 11.7% due to significantly

lower margin in the Industrial Solutions segment. The margin contraction was caused by uneven capacity utilisation

related to the automotive area (probably 40% of the segment). This is temporary and growth related, but could take

some quarters to reach decent levels, we believe. We estimate gradual margin improvements in the segment and

solid sales growth. Integrated solutions surprised negatively on sales (probably both on telecom and heating

products) but positively on margins (our scenario of price pressure in heating products is somewhat altered).

(SEKm) Last year Actual ABGSC

Q3 17 Q3 18 Q3 18e Dev (%) Dev (SEKm)

Net sales 1,749 1,980 1,906 3.9% 74

EBITA 209 205 222 -7.8% -17

Adj EBITA 209 222 222 -0.1% 0

EBIT 206 203 219 -7.4% -16

Adj EBIT 206 220 219 0.3% 1

Net profit, reported 153 154 165 -6.5% -11

Gross margin 16.1% 17.9% 15.8% 2.1%

EBITA margin 11.9% 10.4% 11.7% -1.3%

Adj EBITA margin 11.9% 11.2% 11.7% -0.5%

EBIT margin 11.8% 10.3% 11.5% -1.3%

Adj EBIT margin 11.8% 11.1% 11.5% -0.4%

EO 0 -17 0

Sales breakdown:

Organic 57.5% 4.0% 5.0%

M&A 13.4% 0.0% 0.0%

FX -2.2% 9.2% 3.9%

Total Y/Y 61.5% 13.2% 9.0%

Per segment

Sales

Medical Solutions 459 596 506 18% 90

Integrated Solutions 819 892 912 -2% -20

Industrial Solutions 473 492 490 0% 2

Eliminations -2.0 0.0 -1.9 nmf 2

EBITA

Medical Solutions 60.0 76 66.8 14% 9

Integrated Solutions 105.0 114 108.5 5% 6

Industrial Solutions 47.0 35 50.0 -30% -15

Eliminations -3.0 -20 -3.0 567% -17

Eliminations adj for EO -3.0 -3.0 -3.0 0% 0

EBIT margin

Medical Solutions 13.1% 12.8% 13.2% -0.4%

Integrated Solutions 12.8% 12.8% 11.9% 0.9%

Industrial Solutions 9.9% 7.1% 10.2% -3.1%

Nolato


Forecast changes: No drama on estimates.


All in all, only minor changes. Worth noting is that net profit and EPS were positively affected by a lower assumed tax rate; from 22.5% to 21.5% due to updated geo mix.

Old New Change (%) Change (SEKm)

2018e 2019e 2020e 2018e 2019e 2020e 2018e 2019e 2020e 2018e 2019e 2020e

Net sales 8,231 8,413 8,772 8,271 8,361 8,696 0.5% -0.6% -0.9% 39 -52 -76

COGS -6,938 -7,067 -7,369 -6,998 -7,023 -7,305 1% -1% -1% -59 43 64

OPEX -324 -396 -410 -328 -394 -406 1% -1% -1% -4 2 4

EBITDA 1,212 1,200 1,252 1,194 1,194 1,243 -1% 0% -1% -18 -6 -9

Adj EBITDA 1,192 1,200 1,252 1,191 1,194 1,243 0% 0% -1% -1 -6 -9

D&A 243 250 258 249 250 258 2% 0% 0% 6 0 0

EBITA 980 958 999 954 947 992 -3% -1% -1% -27 -11 -7

Adj EBITA 960 958 999 951 947 992 -1.0% -1.1% -0.7% -10 -11 -7

EBIT 969 950 994 945 944 985 -2% -1% -1% -24 -6 -9

Adj EBIT 949 950 994 942 944 985 -1% -1% -1% -7 -6 -9

Net f inancials -24 -25 -25 -23 -24 -24 -6% -3% -3% 1 1 1

Tax -201 -208 -218 -195 -198 -207 -3% -5% -5% 6 10 11

EO 20 0 0 3 0 0

Net profit 744 717 751 727 722 755 -2% 1% 0% -16 5 4

EPS diluted (SEK) 28.1 27.1 28.4 27.5 27.3 28.5 -2.2% 0.7% 0.5% -1 0 0

EBITA margin 11.9% 11.4% 11.4% 11.5% 11.3% 11.4% -0.4% -0.1% 0.0%

Adj EBITA margin 11.7% 11.4% 11.4% 11.5% 11.3% 11.4% -0.2% -0.1% 0.0%

EBIT margin 11.8% 11.3% 11.3% 11.4% 11.3% 11.3% -0.3% 0.0% 0.0%

Adj EBIT margin 11.5% 11.3% 11.3% 11.4% 11.3% 11.3% -0.1% 0.0% 0.0%

Nolato


EBITA margin per segment


Sales by segment, 2017


-8%

-3%

2%

7%

12%

17%

Medical Integrated Industrial Eliminations

2015 2016 2017 2018e 2019e 2020e

29%

42%

29%

Medical Solutions Integrated Solutions Industrial Solutions

Detailed estimates Group P/L. Q1’17-Q4’18e and ’15-‘20e


Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 Q4'18e 2015 2016 2017 2018e 2019e 2020e

Sales 1,370 1,675 1,749 1,926 2,039 2,302 1,980 1,950 4,726 4,447 6,720 8,271 8,361 8,696

COGS -1,141 -1,418 -1,467 -1,616 -1,698 -1,966 -1,687 -1,647 -3,904 -3,733 -5,642 -6,998 -7,023 -7,305

OPEX -87 -83 -76 -83 -80 -72 -90 -86 -266 -271 -329 -328 -394 -406

EBITDA 199 232 263 286 322 325 267 280 737 636 980 1,194 1,194 1,243

D&A 57 58 57 59 61 61 64 63 181 193 231 249 250 258

of which depreciation 53 54 54 56 58 59 62 61 167 179 217 240 247 251

of which amortization 4 4 3 3 3 2 2 2 14 14 14 9 3 7

EBITA 146 178 209 230 264 266 205 219 570 457 763 954 947 992

A dj EB IT A 146 178 209 230 244 266 222 219 570 457 763 951 947 992

EBIT 142 174 206 227 261 264 203 217 556 443 749 945 944 985

A dj EB IT 142 174 206 227 241 264 220 217 556 443 749 942 944 985

Financial net -4 -4 -8 -2 -5 -7 -5 -6 -1 -5 -18 -23 -24 -24

EBT 138 170 198 225 256 257 198 211 555 438 731 922 920 961

Tax -30 -39 -45 -45 -50 -53 -44 -48 -135 -102 -159 -195 -198 -207

Net profit 108 131 153 180 206 204 154 163 420 336 572 727 722 755

EO-items 0 0 0 0 20 0 -17 0 0 0 0 3 0 0

EPS diluted (SEK) 4.11 4.98 5.82 6.83 7.79 7.71 5.82 6.16 15.97 12.77 21.74 27.49 27.30 28.53

Sales growth q-o-q 1% 22% 4% 10% 6% 13% -14% -2%

Sales breakdo wn

Organic 18% 43% 57% 47% 55% 34% 3.5% -0.3% 0.2% -7.9% 42% 20% 1.3% 4.0%

Structure 14% 15% 13% 0% 0% 0% 0.0% 0.0% 0.0% 2.7% 9.9% 0.0% 0.0% 0.0%

FX 2% 4% -2% -4% -6% 3% 9.6% 1.5% 11.4% -0.5% -0.4% 2.5% 0.0% 0.0%

Gro up y-o -y 34% 62% 69% 42% 49% 37% 13.2% 1.2% 12% -5.9% 51% 23% 1.1% 4.0%

M argins

Adj EBITDA margin 14.5% 13.9% 15.0% 14.8% 14.8% 14.1% 14.3% 14.4% 15.6% 14.3% 14.6% 14.4% 14.3% 14.3%

R epo rted EB IT A margin 10.7% 10.6% 11.9% 11.9% 12.9% 11.6% 10.4% 11.2% 12.1% 10.3% 11.4% 11.5% 11.3% 11.4%

A dj EB IT A margin 10.7% 10.6% 11.9% 11.9% 12.0% 11.6% 11.2% 11.2% 12.1% 10.3% 11.4% 11.5% 11.3% 11.4%

Adj EBIT margin 10.4% 10.4% 11.8% 11.8% 11.8% 11.5% 11.1% 11.1% 11.8% 10.0% 11.1% 11.4% 11.3% 11.3%

EBITA growth y-o-y 29% 62% 101% 77% 81% 49% -1.9% -4.8% 21.3% -19.8% 67.0% 25.0% -0.7% 4.7%

A dj EB IT A gro wth y-o -y 29% 62% 101% 77% 67% 49% 6.2% -4.8% 21% -20% 67% 25% -0.4% 4.7%

P / L, SEKm

Nolato


Sales, EBITA and EBITA margin by segment


Sales breakdown by segment (growth y-o-y)


Sales Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 Q4'18e 2016 2017 2018e 2019e 2020e

Medical Solutions 487 498 459 511 532 562 596 573 1,645 1,955 2,263 2,371 2,478

Integrated Solutions 399 692 819 900 939 1186 892 828 1,402 2,810 3,845 3,779 3,957

Industrial Solutions 488 489 473 518 568 554 492 551 1,409 1,968 2,165 2,225 2,277

Eliminations -4 -4 -2 -3 0 0 0 -2 -9 -13 -2 -15 -16

Group sales 1,370 1,675 1,749 1,926 2,039 2,302 1,980 1,950 4,447 6,720 8,271 8,361 8,696

EBITA Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 Q4'18e 2016 2017 2018e 2019e 2020e

Medical Solutions 65.0 64.0 60.0 68.0 69.0 73.0 76.0 75.6 216 257 294 313 327

Integrated Solutions 38.0 73 105 116 120 140 114 102 131 332 476 446 467

Industrial Solutions 48.0 48.0 47.0 52.0 57.0 55.0 35.0 46.3 134 195 193 214 221

Eliminations -5.0 -7.0 -3.0 -6.0 18.0 -2.0 -20.0 -5.0 -24 -21 -9 -25 -23

Group EBITA 146 178 209 230 264 266 205 219 457 763 954 947 992

Adj Group EBITA 146 178 209 230 244 266 222 219 457 763 951 947 992

Items affecting comparability 0 0 0 0 20 0 -17 0 0 0 3 0 0

EBITA margin Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 Q4'18e 2016 2017 2018e 2019e 2020e

Medical Solutions 13.3% 12.9% 13.1% 13.3% 13.0% 13.0% 12.8% 13.2% 13.1% 13.1% 13.0% 13.2% 13.2%

Integrated Solutions 9.5% 10.5% 12.8% 12.9% 12.8% 11.8% 12.8% 12.3% 9.3% 11.8% 12.4% 11.8% 11.8%

Industrial Solutions 9.8% 9.8% 9.9% 10.0% 10.0% 9.9% 7.1% 8.4% 9.5% 9.9% 8.9% 9.6% 9.7%

Group margin 10.7% 10.6% 11.9% 11.9% 12.9% 11.6% 10.4% 11.2% 10.3% 11.4% 11.5% 11.3% 11.4%

Adj Group margin 10.7% 10.6% 11.9% 11.9% 12.0% 11.6% 11.2% 11.2% 10.3% 11.4% 11.5% 11.3% 11.4%

Medical Solutions Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 Q4'18e 2016 2017 2018e 2019e 2020e

Organic 11.0% 10.0% 6.0% 12.0% 10.0% 10.0% 22.0% 11.0% 11.0% 9.8% 13.1% 4.8% 4.5%

Structural 14.1% 13.9% 12.2% 0.0% 0.0% 0.0% 0.0% 0.0% 3.0% 9.6% 0.0% 0.0% 0.0%

FX -0.2% 1.5% -2.0% -1.6% -0.8% 2.9% 7.8% 1.1% -1.9% -0.6% 2.7% 0.0% 0.0%

Growth y-oy 24.9% 25.4% 16.2% 10.4% 9.2% 12.9% 29.8% 12.1% 12.4% 18.8% 15.7% 4.8% 4.5%

Integrated Solutions Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 Q4'18e 2016 2017 2018e 2019e 2020e

Organic 28.0% 114% 143% 112% 157% 66% -6.0% -9.7% -30.1% 102% 33.7% -1.7% 4.7%

Structural 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

FX 5.0% 8.5% -4.2% -11% -22% 5.4% 14.9% 1.7% -0.4% -1.6% 3.1% 0.0% 0.0%

Growth y-oy 33.0% 123% 139% 101% 135% 71% 8.9% -8.0% -30% 100% 36.8% -1.7% 4.7%

Industrial Solutions Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 Q4'18e 2016 2017 2018e 2019e 2020e

Organic 16.0% 16.0% 27.0% 17.0% 16.0% 12.0% 2.0% 4.8% 5.7% 18.7% 8.7% 2.8% 2.3%

Structural 27.4% 30.0% 30.1% 0.0% 0.0% 0.0% 0.0% 0.0% 6.6% 20.0% 0.0% 0.0% 0.0%

FX 2.7% 1.7% 0.0% -0.1% 0.4% 1.3% 2.0% 1.5% 0.9% 1.0% 1.3% 0.0% 0.0%

Growth y-oy 46.1% 47.7% 57.1% 16.9% 16.4% 13.3% 4.0% 6.3% 12.6% 39.7% 10.0% 2.8% 2.3%

Group Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 Q4'18e 2016 2017 2018e 2019e 2020e

Organic 17.6% 43.1% 57.5% 46.8% 55.0% 33.7% 3.5% -0.3% -7.9% 41.7% 20.4% 1.3% 4.0%

Structural 14.3% 14.9% 13.4% 0.0% 0.0% 0.0% 0.0% 0.0% 2.7% 9.9% 0.0% 0.0% 0.0%

FX 2.3% 3.7% -2.2% -4.3% -6.5% 3.5% 9.6% 1.5% -0.5% -0.4% 2.5% 0.0% 0.0%

Growth y-oy 34.1% 61.5% 68.8% 42.5% 48.8% 37.4% 13.2% 1.2% -5.9% 51.1% 22.9% 1.3% 4.0%

Nolato


Estimates for Integrated Solutions

Note that the sales split within the segment is not reported by the company

whatsoever and all separated numbers are estimated (also historically). For all

consolidated segment figures see page 7.

Estimated sales split Q1’16-Q4’18e (SEKm)


Estimated sales split FY’13-FY’20e (SEKm)


-27%-44%

-21%

-25%

28%

114%

143%

112%

157%

66%

-6.0% -9.7%

-100%

-50%

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Telecom & EMCHeating products & misc.Total segmentOrganic sales growth Integrated

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37%

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-30%

102%

34%

-1.7%4.7%

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2013 2014 2015 2016 2017 2018e 2019e 2020e

Telecom & EMCHeating products & misc.Total segmentOrganic sales growth Integrated

Nolato


Breakdown of current share price by segment

The table shows that today’s market value of Nolato implies that the market assigns a value of SEK 2.5bn to

Heating Products. Calculated as the residual of current Mcap vs the value of the other segment (given the multiples

below).


Breakdown of current Mcap by segment


Nolato (2019e) Sales of group Margin EBITA* EV/EBITA Implied EV/S EV Net cash MCAP Per share % of MCAP

Medical Solutions 2,371 28% 13.2% 305.9 14.0 1.8 4282 54 4336 163.9 41%

Industrial Solutions 2,225 27% 9.6% 206.9 11.0 1.0 2276 50 2326 88.0 22%

Telecom (part of Integrated Solutions) 1215 15% 10.3% 121.4 10.0 1.0 1214 27 1242 46.9 12%

Sum (Nolato ex heating products) 634.2 12.3 7773 131 7904 298.8 75%

Current (Nolato group) 10312 189 10501 397.0 100%

Residual (implied heating products) 2539 58 2597 98.2 25%

Net debt, other (+Net cash) 189 189

*EBITA adjusted for corporate costs and eliminations allocated per segment

Corporate and eliminations Group -25 Current:

Corporate and elim. allocated per segment: #shares: 26.4

Medical Solutions -7.1 Price: 397.0

Industrial Solutions -6.7 MCAP 10501

Telecom (part of Integrated Solutions) -3.7 Net debt -188.8 (2019e)

Heating products (part of Integrated Solutions) -7.7 EV 10312

Heating products (2019e) Sales of group Margin EBITA* Implied EV/EBITA Implied EV/S EV Net cash MCAP Per share % of MCAP

Heating products (2018-10-22) 2565 31% 11.8% 294.9 8.6 1.0 2539 58 2597 98.2 25%

41%

22%

12%

25%

100%

0%

20%

40%

60%

80%

100%

120%

Medical Industrial Telecom Heating product Nolato (NOLA:B)

% of total Mcap by segment

Medical Industrial Telecom Heating product Nolato (NOLA:B)

Nolato



Income Statement (SEKm) Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018e

Sales 1,370 1,675 1,749 1,926 2,039 2,302 1,980 1,950

COGS -1,141 -1,418 -1,467 -1,616 -1,698 -1,966 -1,687 -1,647

Gross profit 229 257 282 310 341 336 293 303

Other operating items -30 -25 -19 -24 -19 -11 -26 -23

EBITDA 199 232 263 286 322 325 267 280

Depreciation on tangibles -53 -54 -54 -56 -58 -59 -62 -61

Depreciation on intangibles 0 0 0 0 0 0 0 0

EBITA 146 178 209 230 264 266 205 219

Goodwill impairment charges 0 0 0 0 0 0 0 0

Other impairment and amortisation -4 -4 -3 -3 -3 -2 -2 -2

EBIT 142 174 206 227 261 264 203 217

Interest Net -4 -4 -8 -2 -5 -7 -5 -6

Other financial items 0 0 0 0 0 0 0 0

Associated income 0 0 0 0 0 0 0 0

Other EO items 0 0 0 0 0 0 0 0

Pretax profit 138 170 198 225 256 257 198 211

Tax -30 -39 -45 -45 -50 -53 -44 -48

Net profit 108 131 153 180 206 204 154 163

Minority interest 0 0 0 0 0 0 0 0

Net profit discontinued 0 0 0 0 0 0 0 0

Net profit to shareholders 108 131 153 180 206 204 154 163

EPS 4.11 4.98 5.82 6.83 7.79 7.71 5.82 6.16

EPS Adj 4.26 5.13 5.93 6.95 7.90 7.79 5.90 6.24

Total extraordinary items after tax 0 0 0 0 20 0 -17 0

Tax rate (%) 21.7 22.9 22.7 20.0 19.5 20.6 22.2 22.7

Gross margin (%) 16.7 15.3 16.1 16.1 16.7 14.6 14.8 15.5

EBITDA margin (%) 14.5 13.9 15.0 14.8 15.8 14.1 13.5 14.4

EBITA margin (%) 10.7 10.6 11.9 11.9 12.9 11.6 10.4 11.2

EBIT margin (%) 10.4 10.4 11.8 11.8 12.8 11.5 10.3 11.1

Pretax margin (%) 10.1 10.1 11.3 11.7 12.6 11.2 10.0 10.8

Net margin (%) 7.9 7.8 8.7 9.3 10.1 8.9 7.8 8.4

Growth rates Y/Y Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018e

Sales growth (%) 34.1 61.5 68.8 42.5 48.8 37.4 13.2 1.2

EBITDA growth (%) 28.4 52.6 76.5 58.9 61.8 40.1 1.5 -2.1

EBIT growth (%) 29.1 64.2 104.0 80.2 83.8 51.7 -1.5 -4.5

Net profit growth (%) 30.1 65.8 93.7 89.5 90.7 55.7 0.7 -9.4

EPS growth (%) 30.1 65.8 93.7 89.5 90.7 55.7 0.7 -9.4

Adj earnings numbers Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018e

EBITDA Adj 199 232 263 286 302 325 284 280

EBITDA Adj margin (%) 14.5 13.9 15.0 14.8 14.8 14.1 14.3 14.4

EBITA Adj 146 178 209 230 244 266 222 219

EBITA Adj margin (%) 10.7 10.6 11.9 11.9 12.0 11.6 11.2 11.2

EBIT Adj 142 174 206 227 241 264 220 217

EBIT Adj margin (%) 10.4 10.4 11.8 11.8 11.8 11.5 11.1 11.1

Pretax profit Adj 142 174 201 228 239 259 217 213

Net profit Adj 112 135 156 183 189 206 173 165

Net profit to shareholders Adj 112 135 156 183 189 206 173 165

Net Adj margin (%) 8.2 8.1 8.9 9.5 9.3 8.9 8.7 8.5

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Income Statement (SEKm) 2011 2012 2013 2014 2015 2016 2017 2018e 2019e 2020e

Sales 2,977 3,874 4,522 4,234 4,726 4,447 6,720 8,271 8,361 8,696

COGS -2,610 -3,353 -3,868 -3,520 -3,904 -3,733 -5,642 -6,998 -7,023 -7,305

Gross profit 367 521 654 714 822 714 1,078 1,273 1,338 1,391

Other operating items -177 -234 -86 -95 -85 -78 -98 -79 -144 -148

EBITDA 190 287 568 619 737 636 980 1,194 1,194 1,243

Depreciation on tangibles 0 0 -141 -149 -167 -179 -217 -240 -247 -251

Depreciation on intangibles 0 0 0 0 0 0 0 0 0 0

EBITA 190 287 427 470 570 457 763 954 947 992

Goodwill impairment charges 0 0 0 0 0 0 0 0 0 0

Other impairment and amortisation 0 0 -16 -16 -14 -14 -14 -9 -3 -7

EBIT 190 287 411 454 556 443 749 945 944 985

Interest Net -7 -15 -8 8 -1 -5 -18 -23 -24 -24

Other financial items 0 0 0 0 0 0 0 0 0 0

Associated income 0 0 0 0 0 0 0 0 0 0

Other EO items 0 0 0 0 0 0 0 0 0 0

Pretax profit 183 272 403 462 555 438 731 922 920 961

Tax -51 -70 -89 -98 -135 -102 -159 -195 -198 -207

Net profit 132 202 314 364 420 336 572 727 722 755

Minority interest 0 0 0 0 0 0 0 0 0 0

Net profit discontinued 0 0 0 0 0 0 0 0 0 0

Net profit to shareholders 132 202 314 364 420 336 572 727 722 755

EPS 5.02 7.68 11.94 13.84 15.97 12.77 21.74 27.49 27.30 28.53

EPS Adj 5.02 7.68 12.54 14.44 16.50 13.30 22.27 27.71 27.43 28.78

Total extraordinary items after tax 0 0 0 0 0 0 0 3 0 0

Tax rate (%) 27.9 25.7 22.1 21.2 24.3 23.3 21.8 21.1 21.5 21.5

Gross margin (%) 12.3 13.4 14.5 16.9 17.4 16.1 16.0 15.4 16.0 16.0

EBITDA margin (%) 6.4 7.4 12.6 14.6 15.6 14.3 14.6 14.4 14.3 14.3

EBITA margin (%) 6.4 7.4 9.4 11.1 12.1 10.3 11.4 11.5 11.3 11.4

EBIT margin (%) 6.4 7.4 9.1 10.7 11.8 10.0 11.1 11.4 11.3 11.3

Pretax margin (%) 6.1 7.0 8.9 10.9 11.7 9.8 10.9 11.1 11.0 11.1

Net margin (%) 4.4 5.2 6.9 8.6 8.9 7.6 8.5 8.8 8.6 8.7

Growth rates Y/Y 2011 2012 2013 2014 2015 2016 2017 2018e 2019e 2020e

Sales growth (%) -11.8 30.1 16.7 -6.4 11.6 -5.9 51.1 23.1 1.1 4.0

EBITDA growth (%) -24.9 51.1 97.9 9.0 19.1 -13.7 54.1 21.8 0.0 4.1

EBIT growth (%) -24.9 51.1 43.2 10.5 22.5 -20.3 69.1 26.2 -0.1 4.4

Net profit growth (%) -29.4 53.0 55.4 15.9 15.4 -20.0 70.2 27.1 -0.7 4.5

EPS growth (%) -29.4 53.0 55.4 15.9 15.4 -20.0 70.2 26.5 -0.7 4.5

Profitability 2011 2012 2013 2014 2015 2016 2017 2018e 2019e 2020e

ROE (%) 11.3 17.1 24.6 25.0 25.3 18.6 28.5 30.7 26.0 23.7

ROE Adj (%) 11.3 17.1 25.9 26.1 26.1 19.4 29.2 30.9 26.1 23.9

ROCE (%) 16.8 26.4 36.1 33.2 35.4 22.7 32.8 38.6 35.2 34.2

ROCE Adj(%) 16.8 26.4 37.5 34.4 36.2 23.5 33.4 38.9 35.3 34.4

ROIC (%) 11.3 15.8 23.9 25.1 26.0 16.7 24.3 28.8 25.6 24.8

ROIC Adj (%) 11.3 15.8 23.9 25.1 26.0 16.7 24.3 28.7 25.6 24.8

Adj earnings numbers 2011 2012 2013 2014 2015 2016 2017 2018e 2019e 2020e

EBITDA Adj 190 287 568 619 737 636 980 1,191 1,194 1,243

EBITDA Adj margin (%) 6.4 7.4 12.6 14.6 15.6 14.3 14.6 14.4 14.3 14.3

EBITA Adj 190 287 427 470 570 457 763 951 947 992

EBITA Adj margin (%) 6.4 7.4 9.4 11.1 12.1 10.3 11.4 11.5 11.3 11.4

EBIT Adj 190 287 411 454 556 443 749 942 944 985

EBIT Adj margin (%) 6.4 7.4 9.1 10.7 11.8 10.0 11.1 11.4 11.3 11.3

Pretax profit Adj 183 272 419 478 569 452 745 928 923 968

Net profit Adj 132 202 330 380 434 350 586 733 726 761

Net profit to shareholders Adj 132 202 330 380 434 350 586 733 726 761

Net Adj margin (%) 4.4 5.2 7.3 9.0 9.2 7.9 8.7 8.9 8.7 8.8

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Cash Flow Statement (SEKm) 2011 2012 2013 2014 2015 2016 2017 2018e 2019e 2020e

EBITDA 190 287 568 619 737 636 980 1,194 1,194 1,243

Net financial items -7 -15 -8 8 -1 -5 -18 -23 -24 -24

Paid tax -51 -70 -89 -98 -135 -102 -159 -195 -198 -207

Non-cash items 332 198 -23 -121 20 0 0 0 0 0

Cash flow before change in WC 464 400 448 408 621 529 803 976 972 1,013

Change in WC -218 76 64 -78 -89 -131 -63 5 -168 4

Operating cash flow 246 476 512 330 532 466 773 953 915 965

CAPEX tangible fixed assets -134 -335 -144 -203 -244 -221 -277 -438 -401 -400

CAPEX intangible fixed assets 0 0 0 0 0 0 0 0 0 0

Acquisitions and disposals 0 0 0 0 0 -398 0 0 0 0

Free cash flow 112 141 368 127 288 -153 496 515 514 565

Dividend paid 158 132 158 210 224 263 276 329 331 344

Share issues and buybacks 0 0 0 0 0 0 0 0 0 0

Other non cash items -279 -147 -557 -400 -449 -640 -517 -685 -661 -688

Decrease in net IB debt -9 126 -31 -63 63 -530 255 159 183 221

Balance Sheet (SEKm) 2011 2012 2013 2014 2015 2016 2017 2018e 2019e 2020e

Goodwill 434 553 538 549 543 849 813 774 749 723

Indefinite intangible assets 0 0 0 0 0 0 0 0 0 0

Definite intangible assets 0 0 0 0 0 0 0 0 0 0

Tangible fixed assets 706 735 733 894 952 1,205 1,243 1,570 1,747 1,914

Other fixed assets 43 39 40 48 47 49 55 54 54 54

Fixed assets 1,183 1,327 1,311 1,491 1,542 2,103 2,111 2,398 2,549 2,691

Inventories 236 288 259 264 279 393 530 591 648 669

Receivables 601 747 685 903 1,009 1,017 1,442 1,579 1,639 1,704

Other current assets 0 0 0 0 0 0 0 0 0 0

Cash and liquid assets 124 272 318 256 403 411 669 808 991 1,212

Total assets 2,144 2,634 2,573 2,914 3,233 3,924 4,752 5,376 5,827 6,276

Shareholders equity 1,151 1,205 1,348 1,567 1,759 1,850 2,159 2,585 2,977 3,387

Minority 0 0 0 0 0 0 0 0 0 0

Total equity 1,151 1,205 1,348 1,567 1,759 1,850 2,159 2,585 2,977 3,387

Long-term debt 97 119 196 197 281 819 822 802 802 802

Pension debt 0 0 0 0 0 0 0 0 0 0

Convertible debt 0 0 0 0 0 0 0 0 0 0

Deferred tax 0 0 0 0 0 0 0 0 0 0

Other long-term liabilities 0 0 0 0 0 0 0 0 0 0

Short-term debt 0 0 0 0 0 0 0 0 0 0

Accounts payable 668 942 915 1,060 1,092 1,083 1,582 1,785 1,734 1,824

Other current liabilities 228 368 114 90 101 172 189 204 315 263

Total liabilities and equity 2,144 2,634 2,573 2,914 3,233 3,924 4,752 5,376 5,827 6,276

Net IB debt -27 -153 -122 -59 -122 408 153 -6 -189 -410

Net IB debt excl. pension debt -27 -153 -122 -59 -122 408 153 -6 -189 -410

Capital invested 1,309 1,381 1,300 1,550 1,691 2,381 2,446 2,729 3,049 3,187

Working capital 169 93 29 107 196 327 390 385 553 550

EV breakdown 2011 2012 2013 2014 2015 2016 2017 2018e 2019e 2020e

Market cap. diluted (m) 1,335 2,065 3,854 4,683 6,774 6,919 14,184 10,395 10,395 10,395

Net IB debt Adj -27 -153 -122 -59 -122 408 153 -6 -189 -410

Market value of minority 0 0 0 0 0 0 0 0 0 0

Reversal of shares and participations 0 0 0 0 0 0 0 0 0 0

Reversal of conv. debt assumed equity 0 0 0 0 0 0 0 0 0 0

EV 1,308 1,912 3,732 4,624 6,652 7,327 14,337 10,389 10,206 9,985

Capital efficiency (%) 2011 2012 2013 2014 2015 2016 2017 2018e 2019e 2020e

Total assets turnover (%) 132.5 162.2 173.7 154.3 153.8 124.3 154.9 163.3 149.3 143.7

Capital invested turnover (%) 246.1 288.0 337.3 297.1 291.6 218.4 278.4 319.6 289.4 278.9

Capital employed turnover (%) 262.6 356.1 397.0 309.7 300.5 228.3 294.1 338.2 311.6 301.7

Inventories/sales (%) 7.7 6.8 6.0 6.2 5.7 7.6 6.9 6.8 7.4 7.6

Customer advances/sales (%) 0 0 0 0 0 0 0 0 0 0

Payables/sales (%) 27.5 20.8 20.5 23.3 22.8 24.5 19.8 20.4 21.0 20.5

Working capital/sales (%) 2.0 3.4 1.3 1.6 3.2 5.9 5.3 4.7 5.6 6.3

Financial risk and debt service 2011 2012 2013 2014 2015 2016 2017 2018e 2019e 2020e

Net debt/equity (%) -2.3 -12.7 -9.1 -3.8 -6.9 22.1 7.1 -0.2 -6.3 -12.1

Net debt/market cap (%) -1.9 -8.3 -4.1 -1.4 -2.2 6.6 1.7 -0.1 -1.8 -3.9

Equity ratio (%) 53.7 45.7 52.4 53.8 54.4 47.1 45.4 48.1 51.1 54.0

Net IB debt adj./equity (%) -2.3 -12.7 -9.1 -3.8 -6.9 22.1 7.1 -0.2 -6.3 -12.1

Current ratio (%) 107.3 99.8 122.6 123.7 141.7 145.1 149.1 149.7 160.0 171.8

EBITDA/net interest (%) 2,714.3 1,913.3 7,100.0 -7,737.5 73,700.0 12,720.0 5,444.4 5,202.4 4,962.4 5,167.5

Net IB debt/EBITDA (%) -14.2 -53.3 -21.5 -9.5 -16.6 64.2 15.6 -0.5 -15.8 -32.9

Interest cover (%) 2,714.3 1,913.3 5,337.5 -5,875.0 57,000.0 9,140.0 4,238.9 4,156.5 3,937.7 4,122.7

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Valuation and Ratios (SEKm) 2011 2012 2013 2014 2015 2016 2017 2018e 2019e 2020e

Shares outstanding adj. 26 26 26 26 26 26 26 26 26 26

Fully diluted shares Adj 26 26 26 26 26 26 26 26 26 26

EPS 5.02 7.68 11.94 13.84 15.97 12.77 21.74 27.49 27.30 28.53

Dividend per share Adj 5.0 6.0 8.0 8.5 10.0 10.5 12.5 12.5 13.0 13.0

EPS Adj 5.02 7.68 12.54 14.44 16.50 13.30 22.27 27.71 27.43 28.78

BVPS 43.75 45.80 51.24 59.56 66.86 70.32 82.04 97.73 112.53 128.06

BVPS Adj 27.25 24.78 30.79 38.70 46.22 38.05 51.15 68.48 84.23 100.73

Net IB debt / share -1.0 -5.8 -4.6 -2.2 -4.6 15.5 5.8 -0.2 -7.1 -15.5

Share price 50.75 78.50 146.50 178.00 257.50 263.00 539.00 393.00 393.00 393.00

Market cap. (m) 1,335 2,065 3,854 4,683 6,774 6,919 14,184 10,395 10,395 10,395

Valuation 2011 2012 2013 2014 2015 2016 2017 2018e 2019e 2020e

P/E 10.1 10.2 12.3 12.9 16.1 20.6 24.8 14.3 14.4 13.8

EV/sales 0.44 0.49 0.83 1.09 1.41 1.65 2.13 1.26 1.22 1.15

EV/EBITDA 6.9 6.7 6.6 7.5 9.0 11.5 14.6 8.7 8.5 8.0

EV/EBITA 6.9 6.7 8.7 9.8 11.7 16.0 18.8 10.9 10.8 10.1

EV/EBIT 6.9 6.7 9.1 10.2 12.0 16.5 19.1 11.0 10.8 10.1

Dividend yield (%) 9.9 7.6 5.5 4.8 3.9 4.0 2.3 3.2 3.3 3.3

FCF yield (%) 8.4 6.8 9.5 2.7 4.3 -2.2 3.5 5.0 4.9 5.4

P/BVPS 1.16 1.71 2.86 2.99 3.85 3.74 6.57 4.02 3.49 3.07

P/BVPS Adj 1.86 3.17 4.76 4.60 5.57 6.91 10.54 5.74 4.67 3.90

P/E Adj 10.1 10.2 11.7 12.3 15.6 19.8 24.2 14.2 14.3 13.7

EV/EBITDA Adj 6.9 6.7 6.6 7.5 9.0 11.5 14.6 8.7 8.5 8.0

EV/EBITA Adj 6.9 6.7 8.7 9.8 11.7 16.0 18.8 10.9 10.8 10.1

EV/EBIT Adj 6.9 6.7 9.1 10.2 12.0 16.5 19.1 11.0 10.8 10.1

EV/cap. employed 1.2 1.8 3.0 3.1 4.1 3.2 6.2 4.0 3.7 3.4

Investment ratios 2011 2012 2013 2014 2015 2016 2017 2018e 2019e 2020e

Capex/sales 4.5 8.6 3.2 4.8 5.2 5.0 4.1 5.3 4.8 4.6

Capex/depreciation nm nm 102.1 136.2 146.1 123.5 127.6 182.5 162.8 159.1

Capex tangibles/tangible fixed assets 19.0 45.6 19.6 22.7 25.6 18.3 22.3 27.9 23.0 20.9

Capex intangibles/definite intangibles nm nm nm nm nm nm nm nm nm nm

Depreciation on intangibles/definite intangibles nm nm nm nm nm nm nm nm nm nm

Depreciation on tangibles/tangibles 0 0 19.2 16.7 17.5 14.9 17.5 15.3 14.1 13.1

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Analyst certification I/We, Johan Nilsson Wall, the author(s) of this report, certify that not withstanding the existence of any such potential conflicts of interests referred to below, the views expressed in this report accurately reflect my/our personal view about the companies and securities covered in this report.

Analyst valuation methods ABG Sundal Collier analysts may publish valuation ranges for stocks covered under Company Sponsored Research. These valuation ranges rely on various valuation methods. One of the most frequently used methods is the valuation of a company by calculation of that company's discounted cash flow (DCF). Another valuation method is the analysis of a company's return on capital employed relative to its cost of capital. Finally, the analysts may analyse various valuation multiples (e.g. the P/E multiples and the EV/EBITDA multiples) relative to global industry peers. In special cases, particularly for property companies and investment companies, the ratio of price to net asset value is considered. Valuation ranges may be changed when earnings and cash flow forecasts are changed. They may also be changed when the underlying value of a company's assets changes (in the cases of investment companies, property companies or insurance companies) or when factors impacting the required rate of return change.

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Production of report: 26/10/2018 20:39 CET.

All prices are as of market close on 25 October, 2018 unless otherwise noted.

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Pb. 1444 Vika Box 7269 Forbindelsesvej 12, 10 Paternoster Row, 5th fl 850 Third Avenue, Suite 9-C Schillerstrasse 2, 5. OG 10 Collyer Quay

NO-0115 OSLO Norway

SE-103 89 STOCKHOLM Sweden

DK-2100 COPENHAGEN Denmark

LONDON EC4M 7EJ UK

NEW YORK, NY 10022 USA

DE-60313 FRANKFURT

Germany

Ocean Financial Center

#40-07, Singapore 049315

Tel: +47 22 01 60 00 Tel: +46 8 566 286 00 Tel: +45 35 46 61 00 Tel: +44 20 7905 5600 Tel. +1 212 605 3800 Tel +49 69 96 86 96 0 Tel +65 6808 6082

Fax: +47 22 01 60 60 Fax: +46 8 566 286 01 Fax: +45 35 46 61 10 Fax: +44 20 7905 5601 Fax. +1 212 605 3801 Fax +49 69 96 86 96 99

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Equity Research - 26 October 2018 20:39 CET · 26 October 2018 ABG Sundal Collier 4 Forecast...

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Transcript of Equity Research - 26 October 2018 20:39 CET · 26 October 2018 ABG Sundal Collier 4 Forecast...