Svedbergs - Beating expectations

Q2 report was strong with organic growth of 19% Adj. EBITA estimates up by 11-7% in ‘21e-‘23e Fair value range lifted to SEK 32-72 (29-67) per share Key takes from the Q2’21 report Svedbergs Q2 report was strong, beating our expectations on all lines. The beat was top-line driven, with the P&L scaling well through higher volumes, as sales grew by 35% (19% organic, 0% FX, 16% M&A) reaching SEK 219m, 12% above our expectations and breaking its historical seasonality pattern. All geographies and three business segments (Svedbergs, Macro Design & Cassoe) were up strongly, driving higher volumes across the board.

On the margin side, we note our fears on a lower gross margin played in, while opex scaled nicely to an adj. EBITA margin of 15. 1%, in line with the financial targets and an adj.

EBITA beat of 26% (SEK 33m vs. ABGSCe 26m). Outlook: Significant volumes ahead in the project business For the first time, Svedbergs hosted a conference call in conjunction with the report.

Our expectations of a strong market played in, although it was even stronger than we anticipated. The project market to a large degree is driven by new building starts, which on a R12m basis is up in the mid-20s. These starts tend to show in Svedberg’s P&L roughly 12-18 months after the building start, increasing visibility for the coming 1-2 years.

While we would not expect the consumer business (~60% of sales) to show positive progress matching that of the project business, we continue to see a strong case for growth in both segments – with the project business notably the biggest growth driver for the first time in a while. On the back of the Q2 beat, as well as the positive outlook, we raise our ‘21e-‘23e by 6-5% on sales and 11%-7% on adj. EBITA.

Fair value range lifted to SEK 32-72 (29-67) On our updated estimates, we find the Svedbergs share to be trading at a ‘21e-‘23e EV/EBITA of 11x-9x. This corresponds to the share trading 27-26% below our peer group on ‘21-’23 estimates. On t.