Inission

We expect a solid Q2 for Inission, albeit still hampered by headwinds related to costs and supply. We forecast Q2 sales of 31% y/y (23% organic) and adjusted EBIT of 84% y/y. Inission is increasing its ownership in Enedo to 80%, hoping to boost synergies. We include Enedo's net debt (SEK 137m) in our estimates, bringing Inission's net debt/EBITDA to 2.9x 2022E (3.3x if the remaining 20% stake is paid in cash). We lower adjusted EBIT by 1% for 2022E, but raise it by 1-4% for 2023E-24E. We lower adjusted EPS by 9-11% for 2022E-24E due to the share issuance and interest payments. We update our DCF-based fair value range to SEK 31-43 (30-41). The lower end represents a 10.9% WACC (upper end: 9.6%) and a 1 pp drop in the EBIT margin. Inission trades at a 2023E EV/EBIT of 10x versus 11x for peers. Marketing material commissioned by Inission.

Inission delivered a strong Q1, with sales up 42% y/y and adjusted EBIT growth of ~150%, significantly above our expectations due to lower opex. While Inission lowered its medium-term guidance due to supply issues, we still see long-term potential from structural trends such as electrification and re-shoring. We raise our adjusted EBIT estimates by 7-25% due to the strong margin and now expect a 12% sales CAGR and 31% adjusted EBIT CAGR for 2021-24E. We update our DCF-based fair value range to SEK 30-41 (30-39). The lower end represents a 12% WACC (upper end: 10%) and a 0.5x pp drop in the EBIT margin. Inission is trading at a 2023E P/E of 8.9x and 2023E EV/EBIT of 7.6x, below peers at 11x and 10x, respectively. Marketing material commissioned by Inission.

We expect a decent Q1 with sales up 27% y/y, but adjusted EBIT down 20%, from a low base. We forecast a Q1 margin of 2.2%, down 1.3 pp y/y, based on higher costs for input materials and a lag in mitigating price hikes. As a result, we lower 2022E adjusted EBIT by 9% but leave 2023-24 largely intact. Longer term, we see growth potential from the re-shoring trend, operational efficiencies and M&A. We forecast a 10% sales CAGR in 2021-24 with an EBIT margin of 6.8% in 2024, versus 4.9% in 2022, with M&A headroom capable of adding 23% to our 2022 EBITA estimates. We update our DCF-based fair value range to SEK 30-39 (27-39). The lower end represents a 11.7% WACC (upper end: 10.2%), and a 0.5x pp drop in the EBIT margin. Inission is currently trading at a 2023E P/E of 9.4x and a 2023E EV/EBIT of 7.8x, versus 12x and 11x for peers, respectively. Marketing material commissioned by Inission.

Inission delivered a solid Q4 report, with sales up 3% y/y and adjusted EBIT up 30%. The loss from Enedo was larger than anticipated, however, due to restructuring costs. For 2022, we expect 46% adjusted EBIT growth, driven by 19% sales growth and a 5.4% adjusted EBIT margin (up 1 pp y/y). We raise our 2022-24 sales estimates by 1% and adjusted EBIT by 1-7%. We update our DCF-based fair value range to SEK 27-39 (31-45). The lower end of the range represents a 13.8% WACC and a 0.8 pp drop in the already muted EBIT margin. The upper end represents a 10.7% WACC. Inission's valuation is now 5x 2023E EV/EBIT, versus peers at 9x on average. Marketing material commissioned by Inission.

Inission will release its Q4 report on 24 February. We expect a soft report with sales down 2% y/y but adjusted EBIT up 11%, while we forecast that operations in Q4 were still hampered by component shortages. To reflect these disturbances, we lower our adjusted EBIT estimate for 2022 by 5%, including recent M&A, but raise it by 5% for 2023. We conclude that Inission's balance sheet and FCF generation allows for M&A, and is capable of adding roughly 30% to its 2022E EBIT (pro forma). Inission is currently valued at a 2023E P/E of 12x and a 2023E adjusted EV/EBIT of 9x, versus 13x and 11x for peers, respectively. We update our DCF-based fair value range to SEK 31-45 (33-43). The lower end represents a 10.9% WACC (and the upper end 8.9%), and a 0.8 pp drop in the already muted EBIT margin. Marketing material commissioned by Inission.

Inission's Q3 report was soft, as expected, with a 10% sales decline y/y and an 11% drop in adjusted EBIT, although the latter was 17% above our expectation. The y/y decline was driven by component shortages and tough comps from last year. That said, underlying momentum remains good with increased order intake and adjusted 18% y/y organic sales growth. We make only minor sales revisions but lift adjusted EBIT by 1-7% for 2021E- 22E. Inission is currently trading at a 2022E FCF yield of 8% with net debt/EBITDA of 0.4x 2022E. This represents a 2022E P/E of 14x and a 2022E adjusted EV/EBIT of 10x, versus 13x and 11x for peers, respectively. We narrow our DCF-based fair value range to SEK 33-43 (33-45); the lower end represents a 10.9% WACC (upper end: 8.9%) and a 0.8 pp drop in the already muted EBIT margin. Marketing material commissioned by Inission.

Inission will report its Q3 numbers on 11 November. We expect a soft report with sales down 11% y/y and EBIT down 24%, as operations are still hampered by component shortages, causing delays and turbulence throughout the supply chain. We believe volumes, pricing, and efficiency will improve in early 2022; we forecast 45% EBIT growth y/y for next year. We lower 2021E-23E sales by 1-3%. We lower adjusted EBIT by 18% for 2021E and by 6% for 2022E, but raise 2023E by 1%. Inission is currently trading at a 2022E FCF yield of 7.3% with a net debt/EBITDA of 0.8x 2022E. This represents a 2022E P/E of 15x and a 2022E adjusted EV/EBIT of almost 11x, versus peers at 18x and 13x, respectively. We raise our DCF-based fair value range to SEK 33-45 (32-44); the lower end represents a 10.9% WACC (upper end: 8.9%) and a 1.5% drop to the already muted EBIT margin. Marketing material commissioned by Inission.

Inission delivered a mixed bag in Q2, with sales in line with our estimates but adjusted EBIT SEK 2m below, due to higher opex. Enedo's loss was also slightly larger than expected. We expect the global component issues to continue to impact Inission in H2 as it did in Q2. Following the report, we make only minor estimate changes of 1-3% for 2021-23 EBIT, as short-term headwinds are partly mitigated by a favourable mix. Inission is currently trading at 2022E P/E of 13x and EV/EBIT of 10x (adjusted). Marketing material commissioned by Inission.

We expect Inission to present a Q2 still hampered by component shortages and tough y/y comparables, with net sales down 9% y/y and adjusted EBIT down 29% y/y. We expect sales and margins to expand in 2022E due to an improving mix in the short and medium term, and Enedo potentially giving a boost to our estimates. We raise our DCF-based fair value range to SEK 36-44 (34- 42) following minor 2021E-23E sales changes due to ongoing short-term headwinds and 1-13% higher EBIT from more favourable mix. Marketing material commissioned by Inission.

Inission presented a mixed Q1 2021 report with sales 4% below our estimates and adjusted EBIT of SEK 7.9m, SEK 3m above our forecast. We believe the market is currently challenging due to component shortages and weaker demand from customers in the medtech industry, but we argue that Inission is likely using the situation to streamline its operations, which should allow a higher margin once demand returns. The company's comment that demand normalised towards the end of the quarter offers an encouraging sign, which could imply potential upside to our estimates. We currently expect negative organic growth for Q2-Q3 2021E. Following the report, we raise our DCF-based fair value range to SEK 103-126 (98-121). Marketing material commissioned by Inission.