Q1 report. Sales of SEK52.5m, corresponding to 26% YOY growth, were 5% below our estimate, with 38% YOY growth in Performance Chemicals (our estimate: 60%) while Performance Masterbatch continued to exceed our forecast at 15% (our estimate: 8%). Our key conclusions: 1) The miss in Performance Chemicals should not be exaggerated in our view as Q1 2020 was exceptionally strong and management indicated lost volumes in January and February due to supply chain adjustments, which bodes well for pent-up volumes in Q2, in our view; 2) Q1 EBITDA was hurt by additional costs from supply chain adjustments of cSEK1.5m (adjusted EBITDA margin of 6.8%, our estimate: 7.0%) that we believe should not be extrapolated; and 3) the company seems well-capitalised with SEK61m of cash and is FCF positive for first time, benefiting from positive working capital delayed from Q4.

View on company intact. The Q1 report does not change our view that the company is well-positioned for a 35% 2021-2023e sales CAGR and a 10% EBIT margin by 2022e. Annualised Q1 sales correspond to SEK212m and we forecast 11% QOQ sales growth in Q2, which would put run-rate sales at SEK236m, only 16% below the company's 2022e lower-range sales target of SEK275m. We thus believe that the target could be within reach near-term. We highlight that: 1) PET fibre could be the next growth leg and offer meaningful volumes in the next 2-3 years, and 2) the Uponor settlement could offer a sizable sales opportunity in the "triple-digit millions" in the long run if successfully commercialised.

Fair value of SEK13-17 maintained. The shares have re-rated and are trading at a 2022e EV/sales of 3.7x, in line with our specialty polymer peer group, with the group screening at a lower 2021-2023e sales growth and 10%-points lower gross margins.
Click here to view full report (https://www.dnb.no/seg-fundamental/fundamentalweb/GetReports.aspx?file=CMPSP_173663.pdf&Sid=1-7HRVGTE)
Best regards,

Viktor Trollsten | DNB Markets | Equity Research

DNB Bank ASA, Filial Sverige