BTS Group - Almost out of the woods

Other markets recovered well in terms of EBITA Positive outlook for 2021 - we raise our forecasts 20x-14x ‘21e-‘23e EV/EBITA Below our expectations, but solid sequential improvements Although BTS’ Q4 results were slightly below our forecasts, the report offered solid sequential improvements. Sales were SEK 423m (-10% vs. ABGSCe), corresponding to y-o-y growth of -24% versus -25% in Q3 and -32% Q2. EBITA was SEK 45m for a margin of 10.7%, a 23% shortfall vs.

our forecast of SEK 59m. The Other markets business unit (which comprises all markets except Europe and North America) recovered significantly in terms of profitability, and we should highlight that Other market was the first unit to be impacted by the pandemic in H1’20. Estimate changes Going into 2021, we expect BTS’ other business units to follow Other markets’ recovery.

Management guides for improved 2021 profits versus 2020, and that these should be in line with the level seen in 2019. The improvement should stem from a combination of improved sales and higher margins. The positive outlook was more optimistic than we had expected; despite Q4 being below our forecasts, we therefore raise our ’21-’22e sales estimates by 4-2% and our EBITA estimates by 11-1%.

We now forecast 2021 sales growth of 20%, coupled with an EBITA margin of 12.6% (vs. 6.2% in 2020). Strengthened market position into 2021 BTS has a strong position in a large, fragmented market, and has a long track record of delivering double-digit growth and stable margins.

We think that the company has strengthened its position in 2020 on the back of its forward-leaning approach during the pandemic. In 2020, the company has 1) built a larger customer base; 2) strengthened its virtual deliveries (which will remain important post-pandemic); and 3) kept its organisation strong, meaning that it has taken the opportunity to recruit talent when others have reduced their headcount. On our new estimates, BTS’ share is trading at 20.4x-13.6x ‘21-‘2....