Aspo - Demand and performance stabilize
Still rather soft EBIT, yet improvement is to be expected
Aspo Q4 revenue landed at EUR 132m vs the EUR 143m/137m Evli/cons. estimates as ESL’s top line was in line with our estimate while Telko and Leipurin fell short, however all three came in below our estimates in terms of EBIT. ESL’s profitability continued to recover although the EUR 5m EBIT was still low for Q4. Forest and energy industries saw low volumes while weather conditions were challenging, in addition to which labor actions already had an impact. Telko saw relatively stable prices but many customer industries had low demand, while the EBIT of Leipurin was negatively affected by lower prices and inventory write-offs. The EUR 6.8m adj. EBIT thus fell short of the EUR 9.5m/8.2m Evli/cons. estimates.
Demand stabilizing while growth projects proceed
Q1 will be difficult for ESL as winter conditions have been very severe, while Finnish industrial strikes are another challenge. Steel and forest industries are to drive ESL’s volumes this year, yet they start from rather different places as the former has been stable while the latter’s volumes are only now recovering. The green coasters will also begin to contribute this year, however for now they represent only a marginal share of capacity. The Red Sea crisis may have a positive effect on Telko’s prices, which would support EBIT, while it’s likely to help spot market freight rates and further lift Supramax earnings (which are however to be divested some time). Telko is now better positioned for M&A as ESL’s investments have found one source of financing through a minority stake sale.
Valuation not stretched as EBIT should gain also next year
Aspo is valued above 9x EV/EBIT on our FY ’24 estimates, which isn’t a stretched multiple as H1’24 profitability will still be subdued. We estimate ESL’s EBIT to improve by EUR 6m this year, which would by itself be enough to justify the guidance. Meanwhile we estimate Telko’s EBIT to gain by EUR 3m and hence see Aspo’s FY ’24 EBIT at EUR 35.0m. We believe EBIT has more room to gain also next year when H1 should no longer be as soft. We retain our EUR 7.0 TP and BUY rating.