EUR 434.18 For Business Accounts Only

Bufab (Buy, TP: SEK340.00) - Working capital release in sight

Q4 revenues were in line with our estimate, while EBITA was 11% above, demonstrating an improved profitability profile, we believe. Organic growth slowed YOY and management was cautious on 2023, but the quarter saw a positive operating cash flow reversal, which should support the M&A story. We reiterate our BUY and SEK340 target price and have only slightly adjusted our 2023e revenues and EBITA. Q4 review. Bufab reported Q4 revenues of SEK2,074m (1% below our estimate of SEK2,090m). Organic growth slowed to 1% YOY (we forecast 7%) compared to 19% in Q4 2021. EBITA was strong at SEK242m (11% above our estimate of SEK218m), with an EBITA margin of 11.7% (we forecast 10.5%), demonstrating an improved profitability profile and supporting the target of a 12% EBITA margin over a cycle, we believe. The proposed DPS for 2022 was raised to SEK4.75 (3.75) – in line with the payout target of 30% of EPS – to be paid in two instalments during 2023 (April and October). Cash flow was in focus ahead of the report and did not disappoint. Operating cash flow saw a positive reversal from SEK-35m in Q3 to SEK95m in Q4, demonstrating the actions taken by Bufab to decrease net working capital and pay down debt. Net debt excluding lease liabilities/adj. EBITDA declined from 3.0x in Q3 to 2.8x in Q4. We continue to expect a net working capital release during 2023, positively affecting cash flow and helping to bring down leverage. Outlook. Management remained cautious in its 2023 guidance; it reiterated that the segments that benefited during the pandemic are seeing contracting volumes, with other industrial segments performing better. Tough comparable figures from 2022 should also negatively affect organic growth in 2023. We have only slightly adjusted our 2023e revenues and EBITA but have lowered our EPS by 12% due to increased interest rates coming into effect, along with an adjustment to the assumed tax rate.