Grodon Has A Good News, Net Operating Cash Flows Are Worthy Of The Attention
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This report is prepared for the Warsaw Stock Exchange SA within the framework of the Analytical Coverage Support Program. 3.0. This is an excerpt from the Polish version of DM BOÅš SA’s research report.
Sector: Construction materials Market Cap: US$ 51 m
Fundamental rating: Buy (→) Bloomberg code: GRN PW
Market relative: Overweight (→) Av. daily turnover: US$ 0.15 m
Price: PLN 15.16 12M range: PLN 13.66-20.50
12M EFV: PLN 26.60 (→) Free float: 34.2%
Recommended action
We uphold our ST market relative Overweight rating and LT fundamental Buy recommendation for the Company. 1Q22/23 financial results are good, in our view. Another positive catalyst for the Company’s market price may be the proposed dividend. Though we expect a significantly slower sales growth dynamic in FY22/23 due to less favorable system of the photovoltaic installations prosumers accounting system, we believe that decarbonization, withdrawal from expensive fossil fuels, and numerous support programs like Mój PrÄ…d 4.0 and Moje CiepÅ‚o will have favorable impact on Grodno’s financials already in the medium term.
4Q21/22 financial results review
Financials for 4Q21/22 proved to be very close to Grodno’s preliminary results released earlier. A high dynamic of the Company’s revenues seen in the previous quarters was maintained.
We believe that strong sales dynamic in 4Q21/22 stemmed from materially higher yoy sales in the RES segment and in the segment of cables and wires probably helped by the changes in regulations in force from April 1, 2022, wiping out the discount systems and introducing net billing for prosumers.
The Company’s profitability continued to be high in 4Q21/22, the EBITDA margin reached 5.3% vs 2.8% in 4Q20/21.
Net operating cash flows are worthy of the attention as in the very 4Q21/22 the Company generated PLN 38.1 million, mainly on the back of the trade accounts payable change (at PLN 109 million in the full year). After the first 3 quarters of FY21/22 the change reached c. PLN 54 million and, hence, the eop ND at PLN 64.7 million was lower than we expected (PLN 85 million).
Guide to adjusted profits
No factors necessitating adjustments.
Financial forecasts and valuation
We do not see any need to modify either our financial forecasts or valuation (revised in April).
1Q22/23 preliminary results
On August 5, after the market’s close, Grodno released preliminary 1Q22/23 results (reported already on July 1 sales do not constitute any surprise).
As Grodno claims, in 1Q22/23 a growth of revenues and other P&L items stemmed from higher sales in the segments of electronic installation materials, lightning, building automation and industry solutions. On the flip of the coin, the Company’s sales in the RES segment and in the segment of cables and wires were lower yoy which was mainly related to lower sales of photovoltaic micro-installations.
Grodno managed to maintain the EBITDA margin above 5% which is good news, albeit we would like to note a slight qoq decrease of this margin.
Maciej Wewiórski
GPW’s Analytical Coverage Support Programme 3.0
