Q1 trends, estimates, valuation and top picks

The Q1 reports proved that sector companies could maintain record-high margins despite volume declines.

Improving market - BUY the leader

EBIT down 4-1%. Uptick in sold units to continue in Q2'24e. Housing market rebound in the making - BUY

Trelleborg (Hold, TP: SEK395.00) - Sunnier skies await

Overall, Trelleborg’s Q1 was in line with our estimates and consensus, while we believe the outlook comment heading into Q2 might be on the overly cautious side. We have made limited (1% on average) estimate changes on adj. EBITA for 2024–2026e and reiterate our HOLD. We have raised our target price to SEK395 (380) and see limited upside potential for the stock.

Highlighting H2 improvement

Solid Q1 numbers, in line Q2 guidance. No underlying changes, but adding M&A means +2% on '24e EBITA. Maintain HOLD and TP at SEK 375.

JM AB: 2 directors

Two Directors at JM AB bought/maiden bought 1,550 shares at between 183.170SEK and 184.000SEK. The significance rating of the trade was 68/100. Is that information sufficient for you to make an investment decision? This report gives details of those trades and adds context and analysis to them such that you can judge whether these trading decisions are ones worth following. Included in the report is a detailed share price chart which plots discretionary trades by all the company's directors ov...

No drama, limited ests revisions

Jm Ab (Sell, TP: SEK155.00) - Q1 EPS miss

Higher tax costs than forecast meant Q1 EPS missed expectations. Sales of new homes were broadly in line with our estimate – but starts were below, prompting us to cut our 2024e EPS by c19% and 2025e by c5%. However, expecting a catch-up effect, we have raised our 2026e EPS by c16%. In our view, the valuation is already pricing in a market recovery, while we still see a risk of setbacks, mainly from fewer and slower interest rate cuts, and we see a better risk/reward elsewhere in the sector. We ...

Elkem (Hold, TP: NOK20.00) - Muddling through

Q1 EBITDA was largely in line with our forecast and consensus, while EPS took a hit from derivative losses. We have reduced our 2025–2026e EPS by 6% and our target price to NOK20 (22). Although the balance sheet looks fragile at a NIBD/EBITDA of 3.5x and ICR of 4.2x, we believe higher silicon prices should pull it into healthier territories from Q2. However, we have cut our 2024–2025e DPS to zero. We reiterate our HOLD as we expect the silicones market to continue to struggle with overcapacity, ...

Trelleborg (Hold, TP: SEK380.00) - Close to fairly valued in our view

We forecast Q1 sales of SEK8,546m (-1% organic growth YOY) and adj. EBITA of SEK1,479m. We have raised our 2024–2026e adj. EBITA by c9% on average, on the inclusion of the Baron acquisition, our more positive view on the general industrial cycle, and FX movements. We have increased our target price to SEK380 (350) based on our estimate changes and current multiples. However, on our view of limited upside potential and following incremental increases in the valuation (absolutely and relative to o...

Renovation rules now a reality

The Energy Performance of Buildings Directive (EPBD) was approved on 12 April, requiring the modernisation of existing real estate in the EU, and will soon enter the Official Journal of the EU. Member states will have two years to incorporate the provisions into their national legislation. While Q1 is Nordic construction’s low season due to winter effects, we see some downside risk to Q1e consensus and longer-term to 2024–2026e EBIT on lower development gains. We recommend a stock-picking approa...

Elkem (Hold, TP: NOK22.00) - Oversupplied markets set to persist

We expect Q1 EBITDA of NOK734m (results due 07:00 CET on 18 April), driven by sluggish silicones prices and muted silicon markets. We have increased our 2025–2026e EPS by 5–6% to reflect an uplift in European silicon prices, and raised our target price to NOK22 (20). We reiterate our HOLD, as we continue to fear Silicones will be oversupplied for many more years, silicon prices should stay at current levels, given where energy prices are, while carbon prices should come down somewhat on lower me...

Wihlborgs Fastigheter AB: 1 director

A director at Wihlborgs Fastigheter AB bought 63,000 shares at 94.390SEK and the significance rating of the trade was 100/100. Is that information sufficient for you to make an investment decision? This report gives details of those trades and adds context and analysis to them such that you can judge whether these trading decisions are ones worth following. Included in the report is a detailed share price chart which plots discretionary trades by all the company's directors over the last two y...

Jm Ab (Sell, TP: SEK155.00) - Hockey-stick recovery unlikely

The share price has rallied on the peak interest rate narrative, improved consumer sentiment and short covering, but new housing sales remain weak QTD. We expect Q1 profit to miss Infront consensus on price cuts, but starts to be above (results due at 08:00 CET on 23 April). Overall, we believe the share price has run too far ahead of the recovery and profit lead times are much longer than reflected in market expectations. We reiterate our SELL, but have raised our target price to SEK155 (130).

Elkem (Hold, TP: NOK20.00) - Another one bites the dust

Q4 EBITDA of NOK632m and a decision to not pay dividends for 2023 marked the end of a soft year (EPS in 2023 was NOK0.1 versus NOK15.1 in 2022). We have cut our 2024–2025e EPS by ~15–10% due to higher D&A (which rose by ~NOK100m QOQ), and thus have cut our target price to NOK20 (23). We do not see any material signs of recovery within Silicones given the large capacity additions set for 2024–2025e. We reiterate our HOLD.

Trelleborg (Hold, TP: SEK350.00) - Becoming less negative on 2024e

Q4 was relatively solid, with a slight beat on organic growth and margins, as well as an outlook that suggests flat YOY organic growth in Q1. In light of the report and various cyclical datapoints, we are now less negative mainly on H1 organic volumes, and we have raised our 2024–2025e adj. EBITA by c5%. As a result, we have increased our target price to SEK350 (345) but still see limited upside potential and hence reiterate our HOLD.

Jm Ab (Sell, TP: SEK130.00) - KPI boost, but weak margins

Driven by investor package sales, JM started and sold more units than expected in Q4. However, even without property writedowns of SEK245m, profit was weaker than expected. Unlike peers, JM reports profit based on a percentage of completion accounting (meaning project starts and units under production). Given the weak Q4 EBIT margin run rate in the ongoing portfolio, we have reduced our 2024–2026e EBIT margins. We reiterate our SELL and have reduced our target price to SEK130 (140) on our lowere...

Renovation regulation approaching

The ‘trilogue’ process regarding the Energy Performance of Buildings Directive (EPBD) that aims to double renovation rates of commercial and residential properties has been concluded, and the new legislative text is due to be published in spring 2024. Also, the recent pivot in market interest rates has improved the sector outlook, but with long profit lead times. Names with high short interest (JM and SBO) have rallied the recently, but we believe the current valuation underestimates the profit ...

Elkem (Hold, TP: NOK23.00) - Silicones still singing the blues

We expect Elkem to report soft Q4 EPS of NOK-0.1, driven by sluggish silicone and European silicon prices in the quarter. We see little room for optimism in the years ahead for the silicones market, as we believe the significant oversupply cannot be offset by the possibility of slightly higher demand. On the back of a EUR300/t increase in European silicon prices recently, we have raised our 2024 EPS estimate by 14% and thus also our target price to NOK23 (18). We reiterate our HOLD, as we strugg...

Jm Ab (Sell, TP: SEK140.00) - Downturn was deep, effects are long

Despite having raised our unit sales and starts forecasts to reflect a faster market recovery, expecting sales to reach the 2019 level by 2026, we believe EPS is unlikely to recover to ‘pre-slowdown’ levels until after our forecast period. With the share price up on falling interest rates, we believe the market underestimates the profit time lag and magnitude of the 2023–2024 sales drop. We reiterate our SELL, but have raised our target price to SEK140 (100) due to an improved market outlook on ...

Trelleborg (Hold, TP: SEK345.00) - Time for a breather

We forecast Q4 sales of SEK8,561m (-1% organic growth YOY) and adj. EBITA of SEK1,440m. We have lowered our 2023–2024e adj. EBITA by c3.5% on average, largely due to recent FX movements, and slightly increased our margin estimates. We have raised our target price to SEK345 (316), owing to expanding peer multiples, and believe Trelleborg is trading close to its fair value (after gaining c38% YTD). With limited upside potential to our new target price and organic growth set to fade, we have downgr...