Oriola - Solid mid-term potential
With the financial targets announced earlier along with major investments known, Oriola’s CMD was limited in terms of significant new news, which we see as a positive given earlier concerns. More clarity was however provided on the roadmap to achieving the nearly doubling of EBITDA in 2029.
“No news is good news” given earlier concerns
Oriola held its Capital Markets Day on May 13th. With the long-term financial targets announced earlier and major investments on-going, the CMD brought little significant new news. In light of our concerns ahead of the CMD relating especially to the strengthening of the equity ratio, we consider this a positive, as no plans to strengthen the balance sheet other than through cash flows were announced. In terms of the joint venture, the possibility of a future sale was not stated but implied but would require healthier profitability levels.
Seeking to add EUR +30m EBITDA by 2029
Oriola laid out a more detailed roadmap for profitability development, which would result in a net profit of EUR 30m in 2029 (excl. Kronans). The main contribution comes from an EUR 30m (10+10+10) increase in EBITDA through organic growth (target +5% p.a.), investments (ERP, Järvenpää, Sweden capacity) and efficiency (cost/net sales <75%). CAPEX for the strategy period is estimated at EUR 20-30m. The profitability gains would enable achieving the equity ratio target of 15-20% and maintaining the dividend policy of distributing 2/3 of net profit (excl. JV). We view the near-term development somewhat cautionary, before the benefits from the investments kick in, although Oriola has demonstrated the ability to improve efficiency through smaller actions (5% annual cost-per-pack reduction 2023-25). We expect to see dividend proposals to remain on the lower side, with options for additional dividends for financial flexibility. Plans for profitability improvements in Kronans were also shown, consisting of EBITDA gains of EUR +60m by 2029.
BUY (ACCUMULATE) with a TP of EUR 1.0
We have not made changes to our estimates based on the CMD. The financial targets and planned profitability demonstrate clear potential, which in our view is still too early to emphasize. We retain our TP of EUR 1.0 but raise our rating to BUY (ACCUMULATE) following share price declines.