Bufab (Buy, TP: SEK340.00) - Focus on free cash flow
Bufab reported strong organic growth in Q1–Q3, but cash flow was depressed with above-normal inventories. For Q4, we expect continued growth and will focus on free cash flow to support debt repayments. We have introduced our estimates for 2025, and we reiterate our BUY and SEK340 target price. Q4 preview. We expect revenues of SEK2,090m, up c31% YOY (7%-points organic, 8%-points FX tailwind, 15%-points M&A). We believe the main growth drivers to have been sale price increases during 2022 and increasing volumes in regions outside the Nordics. We forecast group EBITA of SEK218m, up 29% YOY, translating into a margin of 10.5%. The Q4 results are due on 9 February (we expect the report to be released around 07.30 CET). Organic growth was solid in Q1–Q3 due to price hikes, higher volumes, and increased market shares. However, North experienced slower growth than the other segments in Q3, partly due to lower volumes and its already large market share. We expect group organic growth to remain strong in Q4 but believe tough YOY comparables and a general industrial slowdown could start to affect organic growth from H1 2023.Bufab is a trading company that offers its customers a full-service solution as a Supply Chain Partner for sourcing, quality control and logistics for C-Parts (screws, nuts, washers, etc.). Co.'s customer offering, Global Parts Productivity™, aims to enhance the productivity of the customer's C-Parts value chain, reducing their total costs related to C-Parts. Co. has a diversified customer base in several geographies and sectors within the manufacturing industry.
DNB Markets is the investment banking arm of DNB Bank ASA and is focused primarily on the Nordic region, as well as internationally on niches such as global shipping, energy and related services, and seafood. DNB Markets offers services in FICC, Equities and Investment Banking advisory from offices in Oslo, Stockholm, London, Singapore and New York. Equity research coverage is offered on c250 Nordic companies. DNB was ranked no.2 in Extel Nordic Research 2017. The DNB Markets’ Credit and FICC Macro & FX Research teams are repeatedly highly rated by Prospera Nordic Institutional Investor Surveys.
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