Lagercrantz - Yet another quarter of good margins
Sales down 1% y-o-y (-1% organic & +2% M&A) Solid margins drove EBITA 9% above ABGSCe EBITA estimates up 4% for ‘20/21e-‘22/23e Solid report on high margins Lagercrantz reported a strong set of numbers, mainly on the back of higher margins. Q3’20/21 sales came in at SEK 1,078m, -1% vs. ABGSCe and Factset consensus. All segments but Mechatronics contributed to the 9% better than ABGSCe EBITA, coming in at SEK 168m.
Notably, the electronics segment had high profitability, delivering an EBITA margin of 12. 5% (9. 0%), beating our estimates by 34%.
The management stated that the strong results in Electronics was 60% due to good cost control and 40% due to recovering end markets. Sales unchanged, margins to keep expanding We leave sales relatively unchanged as we have already pencilled in a solid recovery and recent acquisitions were already factored into a previous update, along with FX. However, we do update our margin assumptions going forward, factoring in that the solid cost control will continue in ‘21/22e, when volumes return to normal.
We now expect EBITA margins of 14. 6% in both ‘20/21e and ‘21/22e, with an increase to 14. 9% in ‘22/23e.
Management mentioned a solid outlook for acquisitions and that they should continue at a high rate. We already have c. 4% M&A growth for ‘21/22e in our numbers and find it likely that Lagercrantz could reach at least 10% growth from M&A, although not reflected in our numbers currently.
Back to a discount, now at -5% vs its core peer group The share is up 15% over the last three months, trading at 23x NTM EV/EBITA on our updated numbers, which is slightly below the peer average (-10% vs. Lifco, -4% vs. Indutrade, -2% vs.
Addtech). We calculate that Lagercrantz has acquired more growth than peers for its next FY and find comments regarding a high acquisition agenda encouraging. In 2020, Lagercrantz’s share has seen a significant re-rating (as have peers) and is trading at a 49% premium relative to its average 5Y NTM EV/EB.
