Hexatronic: Preliminary Figures Way Above Forecasts – Again
Research Update
2022-10-13
09:34
Redeye raises its forecasts and Base Case following Hexatronic’s preliminary Q3 figures beating our estimates significantly, especially on margins, like in Q2.
FN
Fredrik Nilsson
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Yesturday (October 12), Hexatronic released preliminary figures for Q3 2022; as seen in the table below, both sales and EBITA beat our forecasts significantly.
Like in Q2 the sales number was strong, beating our forecast by 10%, while the EBITA beat our forecast by an impressive 37%, following a record-high EBITA margin of 18.3%.
Management mentions solid growth in all three strategic growth markets (the US, the UK, and Germany), driving the 50% organic y/y growth. With its above-average margins, we believe the US market was the strongest contributor and a driver behind the record-high margin level. Despite the strong growth in especially the US market, management believes the activity level is still not on par with the peak level in Sweden (in relative terms, of course). The strong dollar likely positively impacted sales and margins, as the fiber cables used for the US market are manufactured in Hudiksvall, Sweden. However, the fiber is bought in US dollars. Thus, the net impact on margins of the strong dollar is likely small.
While we thought the 16.7% EBITA margin seen in Q2 2022 was a peak level, the preliminary Q3 figures show we were wrong. The investments in additional production combined with a high demand highlight that Hexatronic’s scalability is high.
SEKm | 2020 | 2021 | 2022e | 2023e | 2024e |
Revenues | 2,080.8 | 3,491.5 | 6,358.5 | 8,497.8 | 10,288.0 |
Revenue Growth | 12.9% | 67.8% | 82.1% | 33.6% | 21.1% |
EBITDA | 277.8 | 492.2 | 1,093.3 | 1,476.6 | 1,801.5 |
EBIT | 181.6 | 357.9 | 894.1 | 1,244.6 | 1,547.0 |
EBIT Margin | 8.7% | 10.3% | 14.1% | 14.6% | 15.0% |
Net Income | 131.3 | 255.0 | 651.5 | 939.6 | 1,178.5 |
EV/Revenue | 1.5 | 6.0 | 3.7 | 2.8 | 2.2 |
EV/EBIT | 17.5 | 58.7 | 26.0 | 18.9 | 14.9 |
We raise our 2022, and 2023 EBITA forecast by 16% due to slightly increased sales estimates and raised margin assumptions. We also increase our average margin assumptions from ~15% to ~16% on the EBITA level for 2024-2027. We assume margin declines gradually during the period as we expect increased competition and a somewhat maturing market. However, the average of 16% is still a very solid level, relative to history and Hexatronic’s target of >12%.
Our revisions result in a new Base Case of SEK 115 (101), following a ~16% increase in EBITA for 2022 and 2023 and increased margin assumptions for the mid-term.
We will get back with final adjustments following the full Q3 report published on October 28.
Balance sheet | |||||
Assets | |||||
Non-current assets | |||||
SEKm | 2020 | 2021 | 2022e | 2023e | 2024e |
Property, Plant and Equipment (Net) | 441.1 | 1,071.9 | 1,232.8 | 1,312.8 | 1,438.9 |
Goodwill | 257.2 | 1,064.5 | 1,064.5 | 1,064.5 | 1,064.5 |
Intangible Assets | 291.2 | 320.7 | 434.2 | 967.2 | 895.2 |
Right-of-Use Assets | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
Other Non-Current Assets | 0.00 | 1.8 | 1.8 | 1.8 | 1.8 |
Total Non-Current Assets | 991.5 | 2,458.9 | 2,733.3 | 3,346.3 | 3,400.4 |
Current assets | |||||
SEKm | 2020 | 2021 | 2022e | 2023e | 2024e |
Inventories | 410.3 | 928.8 | 1,398.9 | 1,869.5 | 2,263.4 |
Accounts Receivable | 308.0 | 597.3 | 1,144.5 | 1,529.6 | 1,851.8 |
Other Current Assets | 31.1 | 55.1 | 89.0 | 119.0 | 144.0 |
Cash Equivalents | 212.2 | 675.1 | 553.0 | 267.2 | 682.0 |
Total Current Assets | 961.6 | 2,256.3 | 3,185.4 | 3,785.3 | 4,941.3 |
Total Assets | 1,953.1 | 4,715.2 | 5,918.7 | 7,131.6 | 8,341.6 |
Equity and Liabilities | |||||
Equity | |||||
SEKm | 2020 | 2021 | 2022e | 2023e | 2024e |
Non Controlling Interest | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
Shareholder's Equity | 649.4 | 1,647.5 | 2,171.5 | 2,785.3 | 3,494.1 |
Non-current liabilities | |||||
SEKm | 2020 | 2021 | 2022e | 2023e | 2024e |
Long Term Debt | 453.5 | 1,255.3 | 1,255.3 | 1,255.3 | 1,255.3 |
Long Term Lease Liabilities | 0.00 | 332.4 | 332.4 | 332.4 | 332.4 |
Other Non-Current Lease Liabilities | 167.8 | 104.8 | 104.8 | 104.8 | 104.8 |
Total Non-Current Liabilities | 621.3 | 1,692.5 | 1,692.5 | 1,692.5 | 1,692.5 |
Current liabilities | |||||
SEKm | 2020 | 2021 | 2022e | 2023e | 2024e |
Short Term Debt | 82.0 | 274.3 | 274.3 | 274.3 | 274.3 |
Short Term Lease Liabilities | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
Accounts Payable | 526.3 | 721.0 | 1,271.7 | 1,699.6 | 2,057.6 |
Other Current Liabilities | 74.0 | 379.8 | 508.7 | 679.8 | 823.0 |
Total Current Liabilities | 682.3 | 1,375.1 | 2,054.7 | 2,653.7 | 3,154.9 |
Total Liabilities and Equity | 1,953.1 | 4,715.1 | 5,918.6 | 7,131.5 | 8,341.5 |
Cash flow | |||||
SEKm | 2020 | 2021 | 2022e | 2023e | 2024e |
Operating Cash Flow | 249.8 | 104.8 | 479.0 | 884.9 | 1,193.2 |
Investing Cash Flow | -229.0 | -1,154.3 | -473.6 | -845.0 | -308.6 |
Financing Cash Flow | 89.4 | 1,511.0 | -127.5 | -325.7 | -469.8 |
Disclosures and disclaimers
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