Balco: Hiccup in orders but backlog should support - SEB
Q2: underlying operations should be on track despite lockdowns
We expect an operationally solid quarter despite Covid-19 related lockdowns, and forecast sales to come in at SEK 343m, growing by 5.6% y/y. We expect EBIT at SEK 44m (margin of 12.9%, down 70 bp y/y) with some extra costs and anticipated delays weighing slightly on profitability, we believe. The biggest impact from the pandemic is expected on order intake as social distancing practices, lockdowns and cancelled housing association meetings are likely to have postponed decision making among customers. We forecast orders in Q2 to amount to SEK 284m, down by some 35% y/y, but expect the orders to come back gradually during H2 2020.
Orders should pick up in H2, but second wave is a threat
Despite the expected slump in new orders, Balco should in our view be able to keep its operations and delivery schedule unchanged during 2020 and early 2021 due to the strong order backlog (c. SEK 1.6bn in end Q1). We expect orders to pick up again in H2 2020 but remain somewhat cautious on the possible second wave threat that could have a negative impact on customers’ willingness to initiate new projects during the autumn and impact 2021/22 deliveries.
Fair valuation mid-point increased slightly to SEK 98 (96)
Our updated fair valuation range is set at SEK 89-108, with mid-point value indicating a fair share value of SEK 98 (96) per share. The fair valuation mid-point implies 2021E EV/EBIT of 12x.
https://research.sebgroup.com/pdf/Balco210820.pdf
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