Ferronordic - Record Q1 EBIT signals recovery
Q1 EBIT of SEK 80m (1% vs ABGSCe, 23% vs cons) ’21e-’23e sales up 1%, impact from higher CS forecasts Trading at ~8x EV/EBIT ’21e, 7-12% lease adj. FCF yield Q1: record EBIT and exceptional contracting services growth Ferronordic reported Q1 sales of SEK 1,267m (3% vs. ABGSCe, 9% vs. cons), up 13% y-o-y (40% org, -27% FX, 0% M&A).
The growth was partly driven by the contracting services (CS) segment (+99% org growth y-o-y), mainly stemming from the Norilsk project. Equipment sales in Russia/CIS grew 57% organically due to higher prices in Russian roubles and new units sold increasing 31% y-o-y (vs. 26% growth in CE market units, according to AEB market data), once again proving Ferronordic’s ability to outperform the market.
Group EBIT was SEK 80m (1% vs. ABGSCe, 23% vs. cons), a new Q1 record for Ferronordic despite a negative EBIT contribution of SEK -14m from Germany.
The EBIT margin improved from 4. 6% in Q1’20 to 6. 3% in Q1’21 (ABGSCe 6.
4%, consensus 5. 6%) as a result of lower SGA expenses. Management highlights that the business environment is somewhat uncertain due to supply chain constraints and the potential increase of the utilisation fee in Russia, but maintains that a market recovery is still expected in 2021.
Sales up by 1% for ’21e-’23e; impact from ramp-up in CS We raise sales by 1% in ’21e-’23e, driven by positive CS sales revisions as we believe the strong organic growth in Q1 indicates a quicker ramp-up in CS projects than we had expected. Our EBIT revisions are somewhat smaller, with our higher sales estimates slightly offset by an increasing share of the lower-margin CS operations and a negative sales mix affecting gross margins at group level. ~8x EV/EBIT ’21e, 7-12% lease adj.
FCF yield ’21e-’23e On our estimates, the share is currently trading at ~8x EV/EBIT, offering 7-12% lease adj. FCF yields for ’21e-’23e. Looking ahead, we expect a gradual market recovery, driving strong organic growth in the coming quarters on the back of ea.
