EUR 102.26 For Business Accounts Only

Sales momentum strengthens in 3Q17

Sioen reported a strong top-line performance in 3Q17. Group sales reached €116.3m in 3Q17, up 32.2% y-o-y, and 9% above our forecast . Half of the beat is from a stronger performance of acquisitions, while the other half is from organic growth in Apparel, driven by new contract wins. Guidance remain purely qualitative: the company expects similar underlying trends in 4Q17 as in 9M17 which is, nevertheless, very supportive (5.8% organic growth was achieved in 9M17 vs. our previous forecast of 2.9% for 4Q17). Sioen did hint that raw material prices remain on the rise and that the company will “continue to put emphasis on … the mitigation of the impact of the further price increases of raw materials”. We raise our sales forecast up for 2017e by 3% (reflecting the 3Q17 beat as well as a stronger expected 4Q17 with 5.5% organic sales growth from 2.9% expected previously) which leads to a 5% upwards revision of our EPS estimate. We estimate a fair equity value of €28.9/share (was €28.2) on a DCF model. As long as the economic cycle remains favourable for Sioen, we expect the market to look through the current period of temporary ROCE pressure (from higher raw material prices, recent acquisitions and the renewed capex cycle from 2H17e), rewarding the company with a premium valuation vs. peers.