Hanza - Margins moving in the right direction
Adj. EBITA 14% better than ABGSCe We lift our ’21e-’23e adj. EBITA by 6-9% New fair value range of SEK 15-25 (12-22) Strong margins led to 30% beat in Main Markets Hanza delivered a solid set of Q1 numbers, particularly in terms of profitability. Sales were SEK 567m, down 5% y-o-y (organic -2%, FX -4%, M&A +1%), and 2% below ABGSCe.
Germany continues to be a drag, with sales to Hanza’s largest customer down c. SEK 40m y-o-y (-7% on group sales). If we exclude this customer, organic growth was c.
5% in Q1. The Nordics seem to have gained momentum overall, with exposure to specific sectors such as mining providing solid demand. Adj.
EBITA was SEK 28. 5m, up 40% y-o-y and 14% better than ABGSCe. Main Markets was the key driver of the EBITA beat (30% better than we expected), as it boasted solid adj.
EBITA margins of 6. 3%. Note that if we exclude the problems related to Germany, we expect that the operating margin for Main Markets was closer to 9%.
Other markets were c. SEK 0. 5m below our estimates.
Estimates up on profitability and acquisition We increase sales by 5-6% for ’21e-’23e, primarily due to the acquisition of SLP, but also due to a more positive outlook for Main Markets. The organic development excluding Germany is exceptional, and we expect this momentum to continue, with important customers such as Sandvik reporting 12% order intake growth in Q1’21. Furthermore, we lift EBIT by 5-9% for ’21-’23e (largely due to M&A, but also on increased margin assumptions based on the high profitability of Hanza’s established clusters, and our expectation that SLP should support improved margins in Finland).
We expect a solid trajectory during ’21e as markets return to normal and with the support of increased local sourcing and manufacturing driven by global supply chain issues. Trading at 10x EV/EBIT ’21e with FCF yield 11% ’22e We update our fair value range to SEK 15-25 (12-22), in line with our estimate revisions. Hanza is trading at just under 10x EV/EBIT.
