Partnership With Skyline Robotics Will Strengthen Technology Leadership By 2030

Key Takeaways

• Strategic partnerships and divisional focus aim for growth by enhancing technology leadership and operational efficiency, potentially boosting revenue and profitability.
  
• Strong financial stance with cash flow and leverage supports future acquisitions, serving as catalysts for revenue and earnings growth.
  
• Lower order intake in key divisions and potential U.S. tariffs threaten revenue growth and net margins, despite strong cash flow in Q4.

Catalysts

Provides vertical access solutions in Europe, Asia, Australia, South and North America, and internationally.

• The New Heights 2.0 initiative aims to accelerate profitable growth towards 2030 by establishing more detailed divisional plans, potentially boosting revenue and margins.
  
• Strategic partnership with Skyline Robotics for automating window cleaning on tall buildings could enhance technology leadership, leading to increased revenue and profitability.
  
• Continued investments in product development, particularly in the construction and industrial sectors, are expected to drive future organic growth, positively impacting revenue.
  
• Organizational changes to dedicate leadership to specific divisions, such as Facade Access and HSPS, are likely to enhance operational efficiency and net margins.
  
• Strong cash flow generation and reduced leverage provide the group with opportunities for future acquisitions, which could be a catalyst for revenue and earnings growth.

Alimak Group Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Alimak Group's revenue will grow by 3.0% annually over the next 3 years.
• Analysts assume that profit margins will increase from 8.8% today to 12.2% in 3 years time.
• Analysts expect earnings to reach SEK 944.5 million (and earnings per share of SEK 8.78) by about March 2028, up from SEK 623.0 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 20.1x on those 2028 earnings, down from 24.2x today. This future PE is lower than the current PE for the GB Machinery industry at 25.3x.
• Analysts expect the number of shares outstanding to grow by 0.35% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.26%, as per the Simply Wall St company report.

Alimak Group Future Earnings Per Share Growth

Risks

• The group experienced a lower order intake in divisions such as Facade Access, HSPS, and Wind, which might impact future revenue growth if this trend continues.
  
• The Construction division faced a soft quarter due to weaker order intake and an unfavorable mix of deliveries, impacting its revenue contributions to the group.
  
• There are concerns about the impact of U.S. tariffs on aluminum imports and other materials needed for U.S. production, which could increase costs and impact net margins.
  
• Although cash flow was strong in Q4, the ability to reduce working capital every year is uncertain, which could impact future cash flow generation.
  
• The anticipated inflation levels and potential tariffs pose challenges in maintaining current net margins unless offset by successful price increases and cost management.

Valuation

• The analysts have a consensus price target of SEK149.0 for Alimak Group based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of SEK164.0, and the most bearish reporting a price target of just SEK140.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be SEK7.8 billion, earnings will come to SEK944.5 million, and it would be trading on a PE ratio of 20.1x, assuming you use a discount rate of 6.3%.
• Given the current share price of SEK142.2, the analyst price target of SEK149.0 is 4.6% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.