Eurocon - Demand is picking up
Gradual recovery still in progress New hiring signals a better market To review costs in the product business Q1: Sales SEK 68. 8m (+1. 3% y-o-y), EBIT margin 6. 6% (4.
6%) Eurocon reported Q1 sales of SEK 68. 8m (67. 9m), which was in line with ABGSCe.
The trend of a gradual improvement after the COVID-19 headwind continued in the quarter, and Eurocon described its customers as increasingly more willing to make investments now than they were in 2020. EBIT was. SEK 4.
5m (3. 1m), corresponding to an EBIT margin of 6. 6% (4.
6%) and in line with ABGSCe. In addition, the company announced it will review the cost structure in its product-related business, which burdened reported EBIT with SEK -0. 6m in Q1.
Eurocon ended Q1 with cash and cash equivalents of SEK 23. 8m (21. 5m) and an R12 EBIT margin of 6.
1%. Minor revisions, expecting margin recovery to continue We only make minor revisions after the Q1 report. We expect the gradual improvement to continue during the year and think customers have delayed investment decisions rather than cancelled them.
This is also supported by the company’s decision to hire 11 people in Q1. In total, we forecast sales growth of 8. 8% for ‘21e and forecast the EBIT margin to strengthen to 7.
8% (5. 6). The higher EBIT margin is derived from an increase in utilization rate and less opex in the product segment.
Eurocon sees increased demand within manufacturing, mining and the forest industries. The mining industry is looking interesting with the LKAB announcement of investments up to SEK 400bn in the next 20 years for the production of fossil-free steel through the HYBRIT JV with Vattenfall and SSAB. ‘21e EV/EBIT of 12.
3x, P/E of 15. 1x and a 4. 5% div.
yield After two challenging years, we think Eurocon is on its way back, especially towards its EBIT margin target of 10%, but with the sales growth target of 10% annually looking a bit more challenging. However, the investments from LKAB could be a catalyst to improve top-line growth. The share.
