Incapin viktiga kundens roll minskar, men det är känt och det syns kanske alltför mycket i aktiekursen. Enligt mina egna tankar är Incap dock ett kvalitetsföretag, där många grundläggande aspekter är i mycket bra skick.
Företaget verkar vara snabb och smidig. Låga kostnader och hög lönsamhet, tillsammans med världens megatrender, stöder företagets framtid.
Naturligtvis finns det också risker, som förändringar i konkurrenssituationen, försämring av kundernas förhållanden och det faktum att jag tror att aktörerna inom denna bransch har ganska begränsad prissättningskraft.
Det här var mina enkla tankar om detta företag. Jag följer det med intresse, men äger det ännu inte.
Incap reported their Q2 result today. Incap’s largest customer announced that it would have to temporarily reduce its orders due to overstocking. Company’s focus has been on new customer acquisition, increasing sales to existing ones and opening up new opportunities through an acquisition in the USA. Incap’s CEO Otto Pukk interviewed by analyst Antti Viljakainen.
We reiterate our EUR 12.00 target price and Accumulate recommendation for Incap. We made no changes to Incap’s near-term earnings estimates after the Q2 report. The inventory adjustment related to the largest customer depresses the company’s result to a clear downward trend at least in H2, but we do not consider the problem structural. Incap’s long-term strengths, i.e. excellent cost competitiveness and a light organization, have not disappeared and the company managed to carry out a promising acquisition in the US in July. We believe that Incap offers a good expected return for brave and patient investors at the current valuation level (2023e: EV/EBIT 9x).
Contract manufacturing industry has improved profitability in recent years. Even though margins are not so wide, industry is not very capital intense which means it’s possible to generate good ROIC even with thin margins. Inderes Head of Research Antti Viljakainen comments contract manufacturers.
Content: 00:00 Intro 00:12 Three things to look for in contract manufacturers 01:49 Summary
Incap’s (and Scanfil’s) Swedish peer Note issued a profit warning related to its FY’23 sales yesterday. The warning is rather mild and it seem to stem from company specific reasons related to new customer ramp ups. At the same time, Note gave also the guidance for FY’23, which indicates slowing growth and slight margin improvement. Note will have also CMD later today ( the link is here) and the company published also a new medium term financial targets for growth and profitability.
Note’s share is down by more than 15% now, so the market got disapointed. The reasons are a bit difficult to assess as there are no estimates at Bloomberg for Note, even though SEB should be covering the company. However, I guess that the net sales warning for this year and the guidance of slower growth for the next years may be the main disappointing themes to the market. In addition, the share price movement is also be affected by the fact that Note has been premium-priced compared to many of its peers recently due its strong track record in growth and profitability.
Note’s report was well taken in the market as the share is rising by some 8%. There is no information about the forecasts for Q4’23, Q1 or the full year 2024 at Bloomberg even if SEB should cover the share.
Note is counting on some degree of “hockey stick” for H2, although the snapshot still shows no clear signs of improvement in Q1. Naturally that can come true if/when inflation keeps on slowing down and the central bank rate cuts start supporting the economy and investment demand roughly as predicted.
Incap ended the year 2024 better than I expected: organic growth 15% and 10,4 % adjusted EBIT which are both good. However, the outlook was a bit disappointing, although such a scenario was there. I was hoping that Incap would have get back on the growth track this year, and analysts’ estimates was on that track.
Q4:a och bokslutskommuniké av Incap i dag. Otto Pukk är både friskspråkig OCH svenskspråkig. I dagens intervju används allt från uttryck som “Dark hours” till “it is what it is”. Att intervjua på per är trist Teams, så jag tänker ta Pukk på orden (dvs på allvar planera resa till lämplig fabrik). Vore väl kul att se :)?
Incap is a high-quality company that HAD significant risks, but perhaps not anymore…
Here is a fresh and high-quality analysis of the company.
The negative surprise element that we had flagged in our pre-comment on Incap’s outlook materialized and we lowered our forecasts for the company quite significantly, especially for this year. On the other hand, the strong profitability in Q4, the solid cash flow in H2 and the comments on the quarterly turnaround, as well as the decline in the revenue share of the largest customer have, in our view, also removed a fair amount of risk from the stock.
Tuff Q4:a, men förhoppningsvis “darkest hours” (för att använda Pukk’s egna ord) bakomlagda.
Kapaciteten i Indien: bra om det förekommer nyförsäljning vid sidan av den största kunden. En höjning av användningsgraden → bra att den sker på många fronter. Bra med små tecken på att det sker “ramp up” : dvs viss återanställning av personal, även om mkt låga nivåer.
Drastiska drops i både topline (o övrigt) gällande den största kunden, MEN att ha i åtanke: den övergripande risken med bolaget minskar - att man växer inom alla andra kundsegment positivt.
Fortfarande lönsamt, med råge, trots enorm påverkan av den största kunden gällande “helhetskakan”.
