Svedbergs - A strong start to 2021
Q1 beat our EBITA expectations by 14% Demand is holding up, profitability is improving Value range increased to SEK 29-67 (28-64) Strong Q1 beat on profitability Svedberg’s Q1 report was strong, with sales of SEK 202m, 2% above our expectation of SEK 199m. On profitability, the company surprised us significantly, coming in 14% above our estimate, at SEK 29m. We had expressed worries about external uncertainties in terms of raw material prices and freight prices. These proved unnecessary, as the company has been able to offset the effects through its new product launches (which have a lower complexity without lowering end-product quality).
Efficiency gains within logistics were also said to have helped. Lastly, the CEO said that the company aims to offset (pricing & purchasing) more cost pressure both upstream and downstream. At close to 10% market share, the company’s pricing power should be strong.
We raise sales by 1% and adj. EBITA by 3-4% in ‘21e-‘23e after the beat, and we raise our value range accordingly, to SEK 29-67 (28-64) per share. On our updated estimates, the share is trading at 12x-10x EV/EBITA on our ’21-’23 estimates, c.
10% below our peer group. Upbeat comments on market outlook In the report, Svedbergs gave positive comments about the industry outlook. It referred to a positive turn in new-builds and pent-up demand in bathroom renovation.
Given our preview (15 April), we agree. The addressable new-build industry for Svedbergs is looking strong, both in 2021 and beyond. Furthermore, we note that the company’s new product launches have gotten off to a flying start; the new Langfoss shower series has even won a Red Dot Award.
Product development continues to be an important driver, both for the long-term brand development and for margins. M&A market activity continuing On 6 April, we noted BHG Group acquired Hafa Bathroom Group. While it was not positive that a potential quality acquisition was purchased by another player, we are encourag.
