Lagercrantz - Volumes and margins on a par with last year
Q3e sales of SEK 1,094 and EBITA of SEK 166m FY ‘21/22e sales 3% higher on M&A Report due 28 January Q3’20/21 expectations We estimate sales of SEK 1,094m, down 1% y-o-y (-1% organic, +2% M&A, -2% FX). Overall, we expect sequential improvements q-o-q, but note that macro leading indicators are still in negative territory. Although it is still facing tough comps y-o-y, we estimate that Electronics (17% of group EBITA) will see the largest sequential improvement in the group (-3% organic growth y-o-y vs. -20% in Q2).
Additionally, Niche products is facing easy comps (-11% organic growth Q3’19/20) and should see organic growth for the first time in five quarters. Although overall volumes should be slightly lower, we expect the solid cost control over recent quarters will have continued, leading to EBITA margins of 14. 1% (14.
2%). Forecast changes and outlook We have raised FY 21/22 estimates by 3% as a result of increased acquired growth of c. 4% and FX of -1%.
Acquisitions were paused for a large part of FY ‘21/22 (no acquisitions Mars until October), but since then have resumed at a high pace, with five companies adding c. SEK 178m to next FY sales. Overall, we expect FY ’20/21 sales of SEK 4,137m, down 1% y-o-y (-3% organic, 3% M&A, -1% FX) and adj.
EBITA of SEK 576m, for a margin of 13. 9% (13. 5%).
The proportion of proprietary products (now 63% of sales) continues to support margin expansion, and we see more upside given the group’s target of 75%. No longer trading at a discount on 26x NTM EV/EBITA The share is up 27% over the last three months, trading at 26x NTM EV/EBITA, in line with the peer average (-6% vs. Lifco, +5% vs.
Indutrade, +3% vs. Addtech). We calculate Lagercrantz has acquired more growth than peers for its next FY, and given its relative smaller size, we think it should be able to maintain high M&A growth.
In 2020, Lagercrantz’s share has seen a significant re-rating (as have peers) and is trading at a 65% premium relative to its average.
