In this equity research report, analysts Edvin Jabeskog and Olof Nordin take a closer look at the Swedish ventilation company Lindab AB (LIAB). The Company’s has made a substantial transformation since 2018 but is, despite an EBIT margin increase of 6.0%, and an ROE increase of 7.0%, still valued below its historical average. With strong market tailwinds stemming from EU´s Green Deal and profitability improvements from the Company’s investments in efficiency, the analysts estimate an EPS CAGR of 7.8%, and an EBIT margin expansion of 0.6bps from 2021A to 2025E. Based on a DCF valuation equally weighted with a peer valuation, an upside of 18.7% is justified.
Investment highlights
- Valued below its historical average despite an EBIT margin increase of 6.0% and an ROE increase of 7.0% from 2018A-2021A.
- Historical and future investments in efficiency is estimated to improve the asset turnover ratio, increase return on capital, and thus catalyze a higher valuation.
- Strong market tailwinds will benefit Lindab and drive an organic revenue CAGR of 6.6% until 2025E.