Inission: H2 recovery gets further boost from M&A - ABG
This is a third party research report and does not necessarily reflect our views or values
- Sales to improve q-o-q, but still down y-o-y, growth in H2e
- Raise '25e-'27e adj. EBITA by 3-6%, driven by Selteka acquisition
- Acquisition accretive, leverage at 2.7x makes further M&A unlikely
Q2 expectations
We forecast SEK 520m in sales for Q2, representing a typically seasonal uptick from Q1, but still a 9% y-o-y decline (-5% org.). Book-to-bill should remain above 1x, although not at the extreme levels seen in Q4 and Q1 (1.4x, 1.25x), and we forecast a level of 1.1x. On the adj. EBITA margin, we have 5.3% (5.0%) driven by somewhat lower opex due to cost savings, and an improved gross margin. We expect Enedo will continue to contribute negatively y-o-y, with improved performance in the Inission segment mostly offsetting this at group level.
Estimate changes
We raise '25e-'27e sales by 5/9/9%, respectively, and adj. EBITA by 3/6/6%. The raised estimates are mainly driven by the Selteka acquisition (consolidated on 1 July), which was announced earlier this week, and we estimate this to contribute NTM sales of SEK 178m at an EBITA margin of 6.0%. At the acquisition price tag of SEK 89m (of which ~22m is to be paid in shares), and assuming no net debt in Selteka, this implies an acquisition multiple of 8.3x, which we consider accretive, especially given that we think there is some potential for margin expansion in the company once integrated. We expect adj. ND/EBITDA to reach 2.7x after the acquisition, putting some strain on the balance sheet, making further acquisitions in the near term unlikely.
Company valuation
There still remains a lot of uncertainty around the timing of a market recovery, but given the positive trend in order intake over the past two quarters, which we expect to have continued in Q2, we stay confident in H2 growth and gradual margin improvements. The share is currently trading at 12-8x '25e-'27e P/E, compared to its historical median of 13-9x, and Nordic EMS peers at 16-12x.
- Raise '25e-'27e adj. EBITA by 3-6%, driven by Selteka acquisition
- Acquisition accretive, leverage at 2.7x makes further M&A unlikely
Q2 expectations
We forecast SEK 520m in sales for Q2, representing a typically seasonal uptick from Q1, but still a 9% y-o-y decline (-5% org.). Book-to-bill should remain above 1x, although not at the extreme levels seen in Q4 and Q1 (1.4x, 1.25x), and we forecast a level of 1.1x. On the adj. EBITA margin, we have 5.3% (5.0%) driven by somewhat lower opex due to cost savings, and an improved gross margin. We expect Enedo will continue to contribute negatively y-o-y, with improved performance in the Inission segment mostly offsetting this at group level.
Estimate changes
We raise '25e-'27e sales by 5/9/9%, respectively, and adj. EBITA by 3/6/6%. The raised estimates are mainly driven by the Selteka acquisition (consolidated on 1 July), which was announced earlier this week, and we estimate this to contribute NTM sales of SEK 178m at an EBITA margin of 6.0%. At the acquisition price tag of SEK 89m (of which ~22m is to be paid in shares), and assuming no net debt in Selteka, this implies an acquisition multiple of 8.3x, which we consider accretive, especially given that we think there is some potential for margin expansion in the company once integrated. We expect adj. ND/EBITDA to reach 2.7x after the acquisition, putting some strain on the balance sheet, making further acquisitions in the near term unlikely.
Company valuation
There still remains a lot of uncertainty around the timing of a market recovery, but given the positive trend in order intake over the past two quarters, which we expect to have continued in Q2, we stay confident in H2 growth and gradual margin improvements. The share is currently trading at 12-8x '25e-'27e P/E, compared to its historical median of 13-9x, and Nordic EMS peers at 16-12x.