Purmo’s peer gives encouraging comments on the radiator market
Translation: Original comment published in Finnish on 12/7/2023 at 7:10 am EET.
Yesterday, Purmo's competitor, Swiss-based Arbonia, held a CMD where it updated its market outlook for this year and the coming years. Arbonia said it has seen a monthly improvement in orders for radiators compared to last year and expects the market to grow from 2025 onwards. We see this as encouraging for Purmo. However, we do not see the need to make forecast changes based on this alone.
According to Arbonia, demand for radiators has picked up slightly
One of Arbonia’s two divisions, the Climate Division, whose products include radiators and other indoor climate products, corresponds to Purmo's largest division, Climate Products & Systems. Arbonia's comments focus mainly on the German market, but we believe this gives some general indication of developments in the European market. To our understanding, Germany is also one of Purmo's important markets in Europe. Arbonia reports that radiator volumes have been increasing in recent months compared to last year, while at the beginning of the year the decline rates were still high. We note, however, that this is also due to the comparison figures, which were still high in H1'22, but already clearly weaker in Q4'22. In any case, the leveling off of the market is a small positive sign compared to expectations, as Purmo commented in the Q3 earnings call that it expects the market to decline slightly next year as well. Arbonia expects a relatively flat market next year, while our forecast for Purmo is for a drop in revenue of around 5% in 2024. As we wrote last week, Purmo's results will also be supported next year by the progress of a major efficiency program. If volumes surprise positively, we believe that the benefits of the efficiency program should be reflected in improved earnings, rather than simply compensating for declining revenue.
Arbonia expects growth in radiators towards the end of the decade
In the medium term, Arbonia expects the radiator market to grow steadily from 2025 to 2030. Demand for radiators has been in structural decline for 15 years and our expectations for growth are quite modest in Purmo's forecasts, although we have assumed that the market will recover in 2025-26 from its current weak level. However, Arbonia estimates that growth could be longer lasting than our current expectations suggest. Arbonia maintained its target for 2026, when it expects the Climate Division to achieve an EBITDA margin of over 12.5%. In this respect, Purmo's target is higher (15%) and our projections are also between 14-15%.
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Purmo Group
Purmo Group develops solutions for indoor climate. The company provides heating and cooling solutions for residential buildings and premises, including radiators, towel warmers, underfloor heating, convectors, valves, and controls. The business is divided into a number of business areas and the solutions are used in industry and the real estate industry. Customers are found on a global level with the largest concentration in Europe. The products are aimed at corporate and private customers.
Read more on company pageKey Estimate Figures25.10.2023
2022 | 23e | 24e | |
---|---|---|---|
Revenue | 904.1 | 753.2 | 715.7 |
growth-% | 7.18 % | -16.69 % | -4.99 % |
EBIT (adj.) | 60.7 | 64.9 | 66.9 |
EBIT-% (adj.) | 6.71 % | 8.62 % | 9.34 % |
EPS (adj.) | 0.85 | 0.74 | 0.81 |
Dividend | 0.35 | 0.35 | 0.35 |
Dividend % | 4.25 % | 3.57 % | 3.57 % |
P/E (adj.) | 9.70 | 13.22 | 12.08 |
EV/EBITDA | 8.00 | 12.76 | 7.57 |