Svedbergs - Projecting a strong 2021

Q1 report due on 23 April We expect sales of SEK 199m and EBITA of 25m Value range unchanged at SEK 28-64 Minor estimate changes Svedbergs will report its Q4 report on 23 April. As we know, the company had a strong 2020 with c. 13% organic growth in Q4’20. Momentum is likely to continue, although at a slightly lower pace.

We estimate 6% organic growth, for a total sales growth of 18% (13% M&A) for sales of SEK 199m in Q1e. On profitability, we expect an adj. EBITA margin of 12.

7%, a 1. 4pp increase y-o-y, driven by the high-margin Cassøe addition. With the soaring raw material prices we’ve seen during the past months, however, we make slight negative margin revisions, summing up to negative EBITA revisions of Market is looking solid We note several positive data points from the project industry.

Looking at Statistics Sweden’s building starts, we see that the number of building starts grew between Q4’19 and Q3’20. According to Byggfakta, a Swedish industry organisation, its index of building starts (Byggstartsindex) and projects (Projekteringsindex) were up 11% and 4% in 2020, respectively. With the lag of 12-18 months from building start to the P&L of Svedbergs, we argue that there should be significant demand growth in the coming years.

Furthermore, we note the dramatic increase in house prices in Sweden, which often spurs on the intent to renovate. According to Svensk Mäklarstatistik, apartment prices are up 8% and detached houses are up 17% during the last 12 months. With the market continuing to look stronger than expected beyond 2021, we raise our organic growth for 2022 by 0.

5pp. Share is trading at a ’21e-‘23e EV/EBITA of 12. 1x-9.

9x On our updated estimates, the Svedbergs share is trading at an adj. EV/EBITA of 12-10x on ‘21e-‘23e, which is 16-12% below our peer group. With minor estimate changes made, we make no changes to our value range, leaving it at SEK 28-64 per share.