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Hexatronic Group

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Hexatronic Group: Q2 preview, strong growth prospects

Hexatronic will present their report for the second quarter of 2018 on the 16th of August. We expect to see a small organic drop due to the softer Swedish market but with an increasing top-line thanks to the BDI acquisition. We will keep an extra eye on the sales development abroad and if the Swedish market is more back on track. We continue to be positive about Hexatronic’s growth prospects. Our current Base-case amounts to 78 SEK per share.

At the beginning of Q2, the organic order book was 4% lower compared to the same time last year. When including the acquisition of BDI the order book grew by 17%, this signals that we will most likely see a top-line uptake during the coming quarter. Hexatronic stated that they expected to see an increase in volumes during late April and May. We believe BDI will produce even higher sales figures thanks to the peak-season approaching.

For Q2 we expect revenues in the region of SEK 380m corresponding to a growth of roughly 10%, we model a small organic drop due to the softer Swedish market but with an increasing top-line thanks to the BDI acquisition. We expect to see EBITDA margins in the region of 11%, lower than last year but still higher than the company’s financial goal of 10%.

Interestingly the major cable producer Nexans stated the following in their Q2 report: “By contrast, the Telecom infrastructure market confirmed its potential. Sales to telecom operators increased by +1.7% organically in the first half of 2018 after a weak first quarter (-2.1%). Europe was the main growth driver with its single mode optical fiber cable offering”. So according to Nexans the market in Europe is already back on track. We will dig into this further after reading Hexatronic’s Q2 report. We continue to be positive about the company's growth prospects. Our current Base-case amounts to 78 SEK per share.

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