Ferroamp - Q2: set for tailwinds in SSO and battery demand

Q2 report due on 18 August Minor estimate changes from strong demand We raise our value range slightly to SEK 85-125 (83-124) Q2’21 expectations; SSO and battery to mark the quarter Ferroamp should deliver a strong set of numbers in Q2. We expect sales of SEK 38m, up 78% y-o-y. Industry data suggest that the number of solar cell installations have increased in Ferroamp’s main market, Sweden (+35% y-o-y in H1’21), which should drive demand for Ferroamp’s products. We expect the quarter’s sales to largely be driven by strong demand for SSO and energy storage, and a continued ramp-up in activity during the quarter, with June standing out as the strongest month YTD.

We believe that Ferroamp continues to make good progress on its internal efficiency improvements and outsourced production strategy, but still we expect headwinds from increased transportation costs and supply constraints regarding raw materials and key components. Hence, we expect group EBIT of SEK -9m, in line with last year, for a negative margin of 23. 4% (-41.

4% Q2’20). Small positive changes to estimates We have made minor changes ahead of the Q2 report and still expect Q3 to be a superior quarter, marked by an uncommonly high order to sales conversion. We raise our ’22-‘23e EBIT by roughly 2%, driven by slightly higher demand for the SSO and energy storage products, which should be enough to outweigh increased costs.

2. 7x ’22e EV/Sales; new value range of SEK 85-125 (83-124) The stock has been weak recently (-20% L3M) and is now trading at 5. 4x ’21e EV/sales, which comes down to 1.

6x in ‘23e. However, we continue to view Ferroamp as a company with an appealing growth profile, ’20-‘23e sales CAGR of 85%, and cutting-edge products that solve critical problems. We lift our fair value range to SEK 85-125 (83-124) per share on slightly positive estimate revisions and retain our ‘22e EV/Sales target multiple range of 3.

0-4. 5x.