Due to a slump in the construction and assembly industry we expect the demand for traditional electrotechnical goods to weaken. At the same time however the Company may experience a growing demand in the RES segment (photovoltaic installations and heat pumps). We believe that the Company’s business perspectives in the long term look favorable, therefore our LT fundamental Buy recommendation stays intact.
3Q22/23 results are good and beating our expectations. Sales did not surprise the market as the Company reports regularly monthly estimations. The meager sales growth (+3% yoy in 3Q22/23 vs +6% in 1-3Q22/23) stems from the high base effect coupled with a slowdown in the construction and electrotechnical markets observed from the beginning of 2022. The high base results mainly from the change of photovoltaic installations accounting system for prosumers in force since April last year. It is worth reminding that in 4Q21 a number of PV installations connections reached c. 141,000 while in 4Q22 it was merely 33,000. Our concerns for falling margins did not come true. The Company managed to improve the EBITDA and EBIT margins qoq. Due to the need to be well stocked with heat pumps Grodno’s working capital requirements are high. At the same time the Company manages to maintain operational efficiency. The working capital to sales ratio is almost flat yoy, so is the inventory to revenue ratio.
