Addtech - Returning to growth in Q3’20/21e

Q3e sales of SEK 2,927m, EBITA of SEK 307m Comps are still challenging, but ease from here Report due 4 February Q3’20/21e For Q3’20/21, we estimate sales of SEK 2,927m, representing an increase of 3% y-o-y (-3% organic, +8% M&A, -2% FX) and adj. EBITA of SEK 307m, up 30% y-o-y on margins of 10. 5% (8. 3%).

We note that comps remain tough in Q3 ‘20/21e, but are mitigated somewhat by the IT attack in Q3 last year (reduced Q3 sales by SEK 130m and EBITA by SEK 90m), and we expect sequential improvements in all of the other segments except Energy in Q3’20/21. We also note that the scrubber comps should become easier in the coming quarters. Forecast changes & outlook We make only minor forecast changes, primarily accounting for a weaker-than-expected scrubber marker affecting Industrial Process in Q3’20/21e, and we have updated FX and M&A.

Addtech has acquired three companies since our most recent update, adding c. SEK 209m to ‘21/22e sales (representing 2. 8% growth from M&A).

For the year, we expect sales of SEK 11,721m, flat y-o-y. Challenging comps in Industrial Process will remain throughout the year, but will be less challenging in the coming quarter; however, the large second wave of scrubber orders will not come until marine activity picks up, which will now be later than we first thought. Addtech has been good at managing costs and maintaining decent margins in a demanding time, and we estimate that together with government support, the adj.

EBITA margin for the year will be 11. 1% (11. 2%), giving EBITA of SEK 1,299m.

Trading at a 67% premium to historical valuation The share is trading at NTM EV/EBITA of 25x (5y avg. c. 15x).

It is trading 3% below Lagercrantz and 8% below Lifco, but 3% above Indutrade. It is worth nothing that the sector is trading at record valuations, with over a 60% premium to historical valuations.