Addtech - Making the most of the recovery

13% EBITA beat vs. cons, strong volumes and margins EBITA up 11-8% in ’21/22-‘23/24e Valued 2% above peers on 28x ‘22/23e EV/EBITA All segments behind significant earnings beat Addtech reported an impressive set of numbers. Sales was SEK 3,279m (+9% vs. ABGSCe and +6% vs.

FactSet consensus) and up 11% organically (ABGSCe +2%). All segments contributed to the beat and showcased strong demand across most subsegments; however, management says Marine continues to be weak. EBITA was SEK 402m, up 31% y-o-y, and 21% better than ABGSCe (+13% vs.

cons). Once again, all segments contributed to the beat. However, both in absolute and relative terms, Industrial Process was the star of the show, coming in 27% better than ABGSCe on EBITA, for a margin of 14% (11%).

Cost inflation is less of a concern We raise EBITA by 11% for ‘21/22e (organic growth +4%, margin assumptions +6% and M&A & FX +1%) and by 8% for ’22/23e-‘23/24e. We think that the demand was accelerating throughout Q1 and should stabilise at a high level. Addtech says that its orderbooks were at a very high level at the end of the quarter.

We had assumed that Addtech could face inflationary pressures and experience lower margins during the pricing transfer period to customers in Q1’21/22e; however, Addtech reports that it has handled this very well, reducing our concerns. We previously expected SG&A to have ramped up during Q1, putting pressure on H2 margins. This has not been the case, and we push the ramp-up to late 2021, assuming that it should occur at a slower pace.

Significant headroom for more M&A On our updated estimates, Addtech is valued 2% above peers (Indutrade, Lifco, Lagercrantz, Sdiptech) at 28x ‘22e EV/EBITA. It now has 7% M&A contribution for ‘21/22e, behind most peers (for example Lifco +12%, Lagercrantz +15%). However, we forecast ‘22/23e lease adj.

ND/EBITDA of 0. 5x, in other words, comfortable headroom for increasing EBITA up to 40% in ‘22/23e through M&A.