DnB Markets - NRC Group ASA (NRC) NRC Group (Hold, TP: NOK6.00) - High-risk assessment proved right

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DnB Markets

Simen Mortensen

EUR 88.67 For Business Accounts Only

NRC Group (Hold, TP: NOK6.00) - High-risk assessment proved right

After highlighting the high risk in NRC for the past few years, this stance was supported by the Q2 report. The underlying results were broadly in line with July’s profit warning, but the company also made some additional goodwill writedowns and indicated a weaker 2024 outlook. Moreover, it announced an equity issue but not the terms, prompting us to be concerned about the dilution risk. We have thus downgraded to HOLD (BUY) and cut our target price to NOK6 (14) – awaiting more clarity on the terms of the planned equity issue.

29/08/2024 1 EN

Underlying

NRC Group ASA

NRC Group collects, processes and sells map data. Co. provides services to the Norwegian market, but focuses mainly on projects abroad. Co.'s geo server, BlomURBEX®, enables online distribution of Co.'s products and databases to its customers. The content of BlomURBEX® consists of Co.'s oblique aerial images, TerraItaly® database and 3D city models. Co.'s operations are divided into two main business areas: Blom Geo Engineering Services, which collects and produces geographic information; and Blom Information Services, which provides geographic information as standardized services or through applications adapted to various uses and platforms.

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NO0003679102 Oslo Bors Norway

Provider

DnB Markets

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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Analysts

Simen Mortensen

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DnB Markets

NRC Group (Hold, TP: NOK3.20) - No EBIT margin catalysts in sight

We believe NRC remains a high-risk EBIT margin recovery case (with potentially high returns). However, based on the 2024 guidance and its Q1s being low season from winter effects, we expect no signs of an EBIT margin recovery until Q2 2025 at the earliest. Also, given NRC’s track record, numerous quarters of profit recovery may be needed for the share to reprice. In an M&A scenario, due to its low EV/sales, we could see upside potential, but this is not our base case. On our updated forecasts (new share count), we reiterate our HOLD, but have reduced our target price to NOK3.2 (6).

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ABG Sundal Collier

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Potential equity issue as Meråkerbanen hampers liquidity. FY'25e target: Adj. EBIT >NOK 140m. Long-term targets reiterated: NOK 10bn in revenues and 5% margin.

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Lyko Group (Sell, TP: SEK95.00) - Waiting for further positive signs

For Q3, we are slightly above consensus on EBIT but below on net profit. We expect Lyko’s results to be weighed down by continuously high financial costs. In our view, focus will remain on its European market, the efforts to improve its group gross margin, and the cash flow position (net debt/EBITDA of c4.4x at end-Q2). We reiterate our SELL and SEK95 target price, reflecting its stretched balance sheet and our belief that it will take time to properly balance growth and profitability.

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September 19, 2024 September 19, 2024 1 EN

Linus Sigurdson

Linus Sigurdson

The weekly navigator

From the past week, we highlight: 1) we hosted investor lunches with the CEOs of Svolder and Byggmästaren at our Stockholm office; 2) we met with Investor, which is continuing to execute on its M&A agenda; 3) we met with VEF, which is seeing positive momentum for fintech VCs in its core markets of Brazil and India.

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September 19, 2024 September 19, 2024 1 EN

Simen Aas

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Bilia AB (Buy, TP: SEK150.00) - Recovery likely pushed to 2025

We are cautious ahead of the Q3 report, as a likely recovery in car earnings is pushed to 2025e, while we expect service earnings to be flattish on still-restrained consumer sentiment near-term. Nevertheless, with c+40% EPS growth in 2025e on a forecast new-car market recovery next year, we remain positive on the stock. We reiterate our BUY but have cut our target price to SEK150 (160), mainly on lower estimates.

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September 18, 2024 September 18, 2024 1 EN

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NRC Group (Hold, TP: NOK6.00) - High-risk assessment proved right

NRC Group (Hold, TP: NOK3.20) - No EBIT margin catalysts in sight

Building a stronger organisation

Lyko Group (Sell, TP: SEK95.00) - Waiting for further positive signs

The weekly navigator

Bilia AB (Buy, TP: SEK150.00) - Recovery likely pushed to 2025

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