Aspo - Earnings drivers to mostly remain
Aspo reports Q1 results on May 12. The trade war and its consequent uncertainty doesn’t help ESL or Telko, however both should still see some earnings gains this year especially due to their recent investments but also because of already low comparison figures.
H1’25 EBITA will still gain, more uncertainty around H2’25
Aspo guided EUR 35-45m FY’25 adj. EBITA in February, back when the trade war hadn’t yet escalated. The higher end of the range assumes a clear economic recovery in H2’25, the prospect of which might now be quite a bit more unlikely as the uncertainty can reduce growth outlook for many industrial sectors. On the other hand at least SSAB Europe saw its Q1 shipments rise 8% y/y, albeit due to some seasonality issues, while its Q2 outlook points to still somewhat higher shipments q/q. Chemicals prices might follow the price of oil down, and so the inventory effect could hurt Telko’s earnings in the short-term, however in the long-term lower price levels don’t matter to a third-party distributor. Telko will nevertheless continue to show growth in H1 due to last year’s acquisitions, and its respective earnings comparison figures aren’t high. We estimate Aspo Q1 adj. EBITA at EUR 7.2m.
More focus on organic improvement after a big year for M&A
We cut our FY’25 earnings estimates by some EUR 2m, of which EUR 1.5m attributable to H2, as we estimate just below EUR 40m EBITA for the year. We thus expect ESL’s EBITA to improve by almost EUR 7m this year due to the already low comparison figures as well as new green coasters. For Telko we estimate a gain of EUR 4m, and the almost EUR 17m EBITA would be in line with the earnings levels seen in H2’24 when the recent acquisitions already showed results. Leipurin doesn’t have quite such significant earnings drivers now, but we expect its margins will continue to improve at a moderate pace. Telko and Leipurin could still be very actively looking for acquisitions, especially in a country like Poland, although their preferable size might now remain relatively small after the big volumes seen last year.
The same trends should take EBITA above EUR 40m next year
Aspo is valued some 10x EV/EBIT on our FY’25 estimates and below 8x next year as earnings have more potential for gains going forward if FY’25 EBITA remains below EUR 40m. We retain our EUR 6.0 TP and BUY rating.