Preview HANZA Q3, 2022: Raised estimate

Analys Hanza

Carlsquare Equity Research have slightly raised our expectations ahead of HANZA’s Q3 report on November 8. We look for some 29 percent sales growth of which about 20 percent organic. This should translate into earnings growth (EBITA) of some 33 percent. Our full year estimates are under review for a possible upgrade following the Q3 report.   

In general, reports so far suggest strong development in the contract manufacturing space during Q3. The listed Swedish EMS company Note reported organic growth of 18 percent in the recent quarter vs 24 percent in Q2. Six percent was due to re-invoicing of extraordinary cost increases on electronic components, similar to Q2. Another peer, AQ Group, states about 27 percent of organic growth in the quarter ended on 30 September, vs. 21 percent in Q2.

The above reports also indicate still sizable pricing effects in the period despite, e.g., metal prices turning lower in H2. While boosting top line growth, as costs typically can be pushed forward to the customer, price inflation is a drag on margins in the short term. However, we expect that HANZA should be able to report relatively stable margins in this environment from increased operating efficiency in the Other markets segment.

We expect HANZA to continue to provide a positive outlook on the back of a strong order intake. Recent news regarding business with new clients provides some support to this view. Industry peers still experience a shortage of electronic components affecting deliveries. Still, Note expects around 25 percent sales growth in Q4 (including acquisitions). This is down from 36 percent in Q3 but still represents a good pace considering tougher comparables.

We raise our Q3 estimates somewhat (around two percent for sales and six percent for EBITA). Thus, we will likely review our full year estimates for upward adjustment if HANZA sales and earnings meet or exceed our projections. Read our latest research update July 28, 2022.

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