Hexpol (Hold, TP: SEK115.00) - Short-term issues mounting
Q4 adjusted EBIT was c4.5% below our estimates and consensus, while the organic growth was in line. Hexpol seems unable to mitigate cost-escalation (raw materials, energy and SG&A) through price hikes and efficiencies, and we believe this will linger into 2022. Margins are under pressure, while the growth backdrop may be improving, given recent automotive industry data. We have adjusted our EPS by -0.6% for 2022e and +2.7% for 2023e, and have cut our target price to SEK115 (125) mainly as peer multiples (one-fourth of our valuation) have dropped recently. We reiterate our HOLD.Hexpol is organized in two business areas: HEXPOL Compounding and HEXPOL Engineered Products. HEXPOL Compounding is engaged as a supplier in the development and manufacture of polymer compounds. HEXPOL Compounding focuses primarily on two key segments of the polymer market: rubber compounding and thermoplastic elastomer compounding. HEXPOL Engineered Products is engaged as a supplier of products such as gaskets for plate heat exchangers and wheels for the forklift industry. The business area also provides rubber profiles, mainly for the construction and engineering industries.
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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