Nolato - Solid outlook for VHP products

Q1 EBIT 3% better than ABGSCe We increase ’21-‘23e EBITA by 3-2% New fair value range of SEK 830-900/share Small deviations to expectations Nolato’s Q1 numbers were relatively in line with our expectations. Sales reached SEK 2,645m, up 28% y-o-y (22% organically), but were 1% below ABGSCe and Infront consensus. Group EBITA was SEK 308m (up 3% vs. ABGSCe and up 1% vs.

consensus). The Medical Solutions and Industrial Solutions segments drove the slightly better EBITA vs. our expectations and offset the otherwise weak performance in the Integrated Solutions segment (8% miss on EBITA vs.

ABGSCe), as the margin disappointed. We had overestimated the margin profile of the new line of VHP products. Integrated solutions should outperform expectations We increase EBITA for 2021e-23e by ~1-2%, based on positive guidance for Integrated Solutions.

It is expected to grow 15% sequentially in Q2 2021e (we had expected ~7%). We extrapolate some of this momentum into the rest of 2021e. This is supported by communication from Nolato’s VHP customer who expect to accelerate rollout, as well as 16 analysts (consensus) who expect 28% growth in 2021e for its VHP segment.

We compare this to Nolato’s consensus, expecting growth in Integrated Solutions of ~3% in 2021e and ABGSCe at 12% (VHP products represent ~70% of Integrated solutions). The reason we are not at 28% is due to a price cut of roughly 10% for the VHP products and more significant FX headwinds for Nolato. We also slightly increase the organic growth rate due to price hikes stemming from surging raw material prices.

It happens mechanically, as Nolato generally has clauses in place to shift increasing costs to its customers. Our positive revisions are largely offset by worse FX, hampering 2021e sales by an additional 2% (now -7% from FX). Stock is trading at 40% below compounders Nolato is trading at 18x 2021e EV/EBIT, which is roughly 40% below compounders with similar financial performance (some of this could be.