Midsona - Q1’20 consumer hoarding equals tough comps
Q1 report due on 29 April Q1e: org. sales SEK 1,012m and adj. EBIT SEK 64m Slightly negative revisions on external uncertainties Tough comps in Q1 due to consumer hoarding In Q1’21, we expect Midsona to show declining organic numbers with sales down 6% organically to SEK 1,012m. This corresponds to a 7% increase, which is driven by a 16% M&A addition and a negative FX impact of c.
3%. We stress that investors should keep the extraordinary comparables from Q1’20 in mind. During the first two weeks of March 2020, Midsona grew by c.
20% organically due to consumer hoarding, a growth level we estimate was maintained or even surpassed during the last two weeks of March. Hence, in line with company comments during the Q4’20 presentation, we expect Q1 comps to be too hard to show organic growth. In terms of estimate changes, we take a more cautious stance towards the seasonal effects in System Frugt, where Q4 is likely a big season for the company.
We fine-tune our sales estimates to better reflect more normalised demand levels after an extraordinary Q1’20, lowering ‘21e sales by 1%. External headwinds taking down estimates low single digits We take a more cautious stance on short-term estimates on the back of recent increase in raw material and freight prices, lowering ‘21e-‘22e EBIT by 3% and 1%, respectively, while leaving 2023 estimates relatively unchanged. We believe Midsona will have seen effects of this and we take a more margin-conservative stance in the short term.
We have seen historically that the company can offset external margin headwinds (such as FX) through pricing, which we believe will be helpful in the long term. Furthermore, we still believe that margins should be able to hold up during 2021 on the back of 1) pricing, 2) M&A synergies and 3) FX tailwinds due to a weaker EUR. Stock is trading at ’21e-’23e EV/EBITA of 20.
5x-15. 4x On our updated estimates, the Midsona share is trading at adj. EV/EBITA of 20.
5x-15. 4x on 2021-2023 estimates; o.
