Seco Warwick: Record Backlog Propels Bullish Outlook for 2024 Sales, Target Price Revised to PLN 36.2/share

Record backlog = strong sales in 2024

We raise our target price from PLN 33.3/share to PLN 36.2/share and reiterate our Buy rating. In our view, the high flow of new orders in 4Q23 (the highest in 2023) will translate into a record order backlog at the end of 2023 (PLN 576mn) and, as a result, the prospect of another sales record in 2024 (PLN 741mn; +9% y/y).

Despite the strengthening of the PLN and pressure on the payroll side, we assume that Seco Warwick, with higher sales, can maintain y/y EBITDA profitability (8.1%) in 2024 and, as a result, meet the incentive program target of PLN 31.4mn of net income for 2024.

We are revising downward our profitability assumptions, due to slowing sales of the CAB battery soldering line in China.

In contrast, we are increasing our sales forecasts for the vacuum metallurgy and most profitable Aftersales segments. During the year, an undiscounted factor could be the completion of furnace testing at the DRI plant project in partnership with Green Iron.

For Seco Warwick, this could potentially be an opportunity to sell as many as 300 units (several thousand units across Europe) over a 5-year horizon at several million euros apiece (several billion PLN in sales over several years). The parties are giving themselves until 2Q24 to test the device, and in 2H24 a decision on serial production may be made.

 

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