Suominen - Attractive stabilizing multiples
Q4 was a strong ending for an extraordinary record year
Suominen’s Q4 revenue grew by 18% y/y to EUR 111m (vs our EUR 106m estimate). Europe grew by 37%, albeit from a very low base. Americas still managed to grow a decent 7%. The 15.6% GM was a tad above our 15.0% estimate. SGA were slightly above our estimate and certain non-recurring expenses, such as bad debts, weighed the bottom line a bit. The EUR 8.5m EBIT thus didn’t top our EUR 8.7m estimate. Suominen sees nonwovens demand will remain on a high level. In our view the 12% y/y revenue growth for FY ’20 makes further gains hard to achieve in FY ’21. We expect Suominen to post flat top line this year.
In our opinion outlook and comments were encouraging
Suominen expects FY ’21 EBITDA to remain in line with FY ’20 (EUR 61m). We view this outlook to be close to what we estimated prior the report. We revise our FY ’21 EBITDA estimate up only a bit, from EUR 55m to EUR 57m. The revision is not big in quantitative terms, yet we see the outlook improves confidence with respect to this year’s results. In our opinion there was a small risk Suominen might have guided declining FY ’21 EBITDA. There remains considerable gross margin uncertainty as raw material and transportation costs appear bound to trend upward, but all in all we view Suominen’s comments to indicate the nonwovens pricing environment is still relatively strong. In other words, gross margin is unlikely to plunge.
We view current valuation attractive on stabilizing earnings
Suominen trades 6x EV/EBITDA and 10x EV/EBIT on our FY ’21 estimates. Recent developments mean a high level of uncertainty persists around profitability margins going forward, however we are now more confident on earnings stabilization. Performance has improved with regards to plant-level efficiency, although the pandemic boost makes it hard to quantify how much these own measures have impacted figures. Suominen has announced certain small investments to upgrade some of its existing production lines, and we see the company is now in a strong position for possible larger investments, be they organic or inorganic. Our new TP is EUR 6.5 (6.0). We retain our BUY rating.