Semcon - Slow start to the year expected
Tough comps in Q1, we look for q-o-q improvements Estimates down 1-2% as vaccinations lag Fair value range of SEK 93-138 (79-134) Q1 report due on Thursday, 29 April at 08:00 CET We expect Semcon to deliver Q1 net sales of SEK 422m (491m), down 14% y-o-y (-13% organically), and EBIT of SEK 35. 1M (50. 2m) for a margin of 8. 3% (10.
2%). Tough comps and restructurings during ’20 are the main reason for the lower top-line, and we think a healthy sign will be if Semcon can improve on the 18% y-o-y sales decline we saw in Q4’20. In addition, there is one less working day in Q1, which is one of the reasons why we forecast a y-o-y drop in the EBIT margin.
Business area-wise, we expect EDS to decline 21% y-o-y on the back of the restructurings, whereas we forecast 1. 9% growth y-o-y (-2. 1% organically) in PI driven by the acquisition of Xtractor in March ’20.
We do not expect any negative impact from the shortage of semiconductors experienced by Volvo, as we think Semcon is more focused on product development than mass market production. Market normalisation from H2 rather than Q2 Since our last update, there has been a postponement of the vaccination schedule in Sweden after the struggles with Astra Zeneca’s vaccine. We have adjusted our forecast accordingly, pushing the recovery further forward and looking at a more normal market after the summer rather than in Q2, as we previously expected.
We think the current climate means that Semcon can conduct business with existing clients, but there are headwinds from both demand uncertainty and the ability to win deals with new customers. In total, we adjust our sales estimates by 1. 8%-1.
4% for ‘21e-‘22e and keep our margin assumptions intact. Trading at ‘21e P/E of 17. 3x, ~25% below peers We raise our fair value range to SEK 93-138 (79-134), as we argue that the new communicated growth target warrants a lower valuation gap to peers.
Now, our fair value range points to a valuation 10%-40% (15%-50%) below key peers, or a P/.
