Ferronordic - Pent-up CE demand to materialise in Q1
Q1 report due on Wednesday 12 May, 07:30 CET We raise EBIT by 5% for ’21e and by 2% for ’22e-’23e ~7x ’21e EV/EBIT, 8-13% lease adj. FCF yield ’21-’23e Q1’21 expectations – strong equipment sales, but neg. FX We expect Q1 sales of SEK 1,234m, up 10% y-o-y (28% organic, -18% FX, 1% M&A). Sales growth continues to be hampered by a weak ruble, although the increasing share of sales from Germany comes with exposure to the more stable euro.
According to market data (AEB), the number of new CE units sold in Russia was strong during Q1’21, increasing by 26% y-o-y (+1% in Q4’20), with the strong market growth mainly helped by catch-up demand from the pandemic materialising during Q1, but also by pre-purchasing of machines due to the proposed increase to the scrapping fee in Russia. We expect Ferronordic’s units sold to increase by 32% y-o-y in Russia/CIS in Q1, due to the company’s history of above-market growth. We expect group EBIT of SEK 79m for a margin of 6.
4% (4. 6%), helped by the higher volumes but somewhat held back by the continued ramp-up costs in contracting services projects and the negative contribution of SEK -13m from Germany. ’21-’23e EBIT up by 2-5%; impact from CE volumes & M&A We raise sales estimates by 3% for ’21 and 2% for ’22-’23, with newly announced acquisitions in Germany expected to add 2% to group sales in ’21e and 1% in ’22-’23e.
Furthermore, we expect a 3% increase in equipment sales in ’21 and 2% in ’22-’22 from higher CE volumes in Russia/CIS, offset by 1% lower AM sales for ’21-’23e, as we expect new unit sales to remove some of the maintenence demand. Group EBIT estimates are raised by 5% for ’21 and 2% for ’22-’23e as a result of our sales revisions, with Germany reaching positive full-year EBIT in ’22e. Trading at ~7x ’21e EV/EBIT, 8-13% lease adj.
FCF yield The Q1 market growth in Russia showed promising signs of a recovery, but the potential scrapping fee increase on CE in Russia could negatively impact future market vol.