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.

Inission reported a Q1 with sales of SEK 232m (-4% versus our estimates) and adjusted EBIT of SEK 7.9m (+60% versus our estimate of SEK 4.9m). However, the deviation in adjusted EBIT was mainly driven by higher than anticipated other income which includes government support. We find it encouraging that the company reports that it saw an uptick in demand at the end of the quarter. However, the company still experiences component shortage and expect the situation to remain throughout 2021. At first glance we expect minor positive revisions on the back of the report and the share to outperform slightly today. Deviation table below.

Inission will present its Q1 report on 6 May. We expect a soft quarter with sales down 1% y/y, mainly driven by a -13% organic headwind. We argue that management will address profitability issues in the group and continue to focus on capturing a larger share of the value chain (ie assisting in all stages from design to service). We cut our earnings forecasts which reduces our DCF-derived fair value range to SEK 98-121 (109-129). Marketing material commissioned by Inission.

Inission's Q4 report was mixed with good sales and a weaker adjusted EBIT. Due to less favourable market conditions we have become more prudent on 2021 and therefore reduce our estimates. However, we are confident that management will continue to work on improving profitability by focusing on increasing value-chain participation and relocating low margin production to its low cost factories. We are becoming more positive about the announced investment in Finnish Enedo as we believe there is a possibility of cross-selling in addition to making a profit on the investment of EUR 6.8m. In the wake of the report we adjust our DCF-based fair value range to SEK 109-129 (106-130). Marketing material commissioned by Inission.

Inission delivered a mixed report with sales of SEK 279m (+5% vs our estimates) and adjusted EBIT of SEK 11m (-22% vs our estimate). The highlights of the report were the stronger than expected organic growth (-4% excluding sale of materials) and a better than expected raw materials to sales ratio of 58.5% (adjusted for changes in inventory). The negative deviation was driven by cost for external personnel and higher than expected D&A. We expect the share to underperform today and negative revisions of around 4-6%.

Inission will report its Q4 2020 on 25 February. Going into 2021, we lower our EBIT margin assumptions as we believe the margin improvement story may take longer to realise than we had expected. We also lift our D&A assumptions. We still see potential upside from value accretive M&A and expanded participation in the value chain, eg by increasing activity in consulting, box-builds, and service. Based on our updated expectations, we reduce our DCF-based fair value range to SEK 106-130 (109-134). Marketing material commissioned by Inission.

Inission released its Q3 report on 11 November. The report included sales of SEK 252m paired with SEK 14m of EBIT. Overall the report was in line with our expectations even though EBIT margin was 20 bp below our estimate. We believe the ventilator order has been delivered and we shift our focus to the recovery in demand, to which we take a more cautious stance. Even though this negatively affects our sales estimates for Q4, we believe profitability will improve y/y in Q4 as the relocation in Norway should be a swing factor. We make minor estimate changes to 2020-22 and update our DCF based fair value range to SEK 109-134 (110-136). Marketing material commissioned by Inission.

We estimate that Inission will deliver a decent Q3 report on 11 November, with -2% y/y organic growth supported by final delivery of the SEK 94m ventilator order, but with adjusted EBIT down -11% y/y. The directed share issue completed in September is a clear positive to us, as the lower gearing opens up for potential M&A. However, we now believe demand will recover more slowly than we previously expected and therefore lower our estimates and our DCF-based valuation range to SEK 110-136 (118-146). Marketing material commissioned by Inission.

Inission reported all-time high sales in Q2, but still 8% below our estimate, as we had expected a bigger impact from the COVID-19-related orders communicated during the quarter. We expect these orders to continue contributing to sales in Q3. The EBIT margin was much stronger than expected at 6%, driven by reduced raw material costs due to a beneficial product mix. As a result of this, we raise 2020E-22E EBIT by 14-18%. During H2, we expect Norwegian production will contribute to an improved margin after completing the reorganisation at Lökken. We update our DCF-based fair value range to SEK 118-146 (116-134). Marketing material commissioned by Inission.

When Inission reports Q2 results on 20 August, we expect a top-line result of SEK 309m, the highest number that the company has ever reported and an increase of 11% y/y. Even though this is, to some degree, the result of recent M&A activity (contributing SEK 47m to sales in Q2), we still estimate an organic sales decline of -5%. Although this is a bit on the optimistic side given the current macroeconomic environment, we note the importance of the recently won SEK 94m order for ventilators, as well as another COVID-19-related order of NOK 20m, which we expect to contribute about SEK 30m in the quarter. On a less positive note, we lower our Q2 EBIT margin expectations by 140 bp, down 310 bp y/y, due to a negative price mix and one-offs that are attributable to capacity being transferred to the Borås site as a result of this order. As such, we cut our EBIT estimate for Q2 to SEK 11m from SEK 15m. We also slightly increase our fair value range to SEK 116-134 (116-132). Marketing material commissioned by Inission.