Q1 22: growth driven by the Americas

Sika has published better than expected Q1 21 results with double-digit organic growth observed in all segments. The performance was particularly strong in the Americas, which benefited from volume growth driven by large-scale refurbishment and new-build projects in connection with distribution and data centres. The company has confirmed its 2023 strategic targets, but we believe that the organic growth in 2022 will be beyond the 10% guided by the company.

FY21: slightly lagged our lofty expectations

Sika published a good set of FY21 results, but slightly below our expectations. It registered sales growth across all markets, and slightly above our estimates, but the EBIT margin was shy by 60bp and net profit by 2%. Management proposed a dividend of CHF2.9, in line with our estimate.

MBCC – Sika’s largest acquisition

After successfully closing the integration of the Parex business, Sika has announced its next big acquisition. Valued at €5.2bn, MBCC will be Sika’s largest acquisition to date. The purchase price represents an 11.5x EV/pro forma 2022E EBITDA, which is a cheap buy for Sika which trades at 21.9x EV/EBITDA. The transaction will be highly complementary across nearly all of Sika’s core technologies, applications and solutions and will bring Sika’s sales to nearly CHF13bn by 2023 (vs CHF9.4bn in 2021

9M 21: persistent growth momentum demonstrated

Sika published a good set of 9m results with sales up by 18.1% in local currencies and 18.2% in CHF. The America region, China and India continue to show strong demand momentum but the same cannot be said for the EMEA region. The Global segment too is suffering from the semiconductor shortage but Sika was able to manage its top-line figures via frequent price increases and the EBIT by better cost management.

H1 21: solid growth leads to guidance update

Sika published better than expected H1 results with a positive sales growth observed across all segments. Sales growth in Europe, due to the strong residential renovation trend, came as a surprise, while the strong rally in APAC was expected. Following the good set of result, the company has updated its FY21 guidance. We too have revised our estimates upwards, but it did not have a significant impact on the target price.

Strong Q1 21, full-year target upgraded

Sika has published better than expected Q1 20 results with organic growth observed in all segments. Once again Sika’s acquisition of Parex turned out to be fruitful, being visible by the double-digit organic growth observed in China. Following the strong performance, especially in Europe and APAC, the company has raised its full-year targets. We have revised our numbers upwards.

FY20: sweet farewell present to the current CEO

Thomas Hasler will succeed Paul Schuler as the CEO from May 2021 and, therefore, FY20 was the last full year in the current CEO’s reign. The FY20 results were a good farewell present to him, with growth in all regions despite the pandemic, a significant increase in the EBIT margin, and successful completion of the integration of Parex, which was the biggest acquisition carried out by him. Sika has proposed a dividend of CHF2.5/share and re-confirmed its 2023 strategic targets.

Prelims for FY20: tough FX but over-proportional growth in EBIT

Sika has released preliminary FY20 figures with a growth of 3.4% registered in local currency but strongly dragged down by negative FX (-6.3%). The company, however, outperformed the market expectations by announcing stronger margins (Sika expects the EBIT margin to be ~14% vs AV est. of 13.3% and consensus 13.5%).

9M 20: Double-digit growth in China; Global Business on a positive trajectory

Sika has published a good set of 9m results with sales up by 2.6% in local currencies. However, it saw a strongly negative currency effect of –6.0%, resulting in an actual sales decline of -3.4%. The best performer was the APAC region which posted growth of 13.9% in local currencies and 8.3% in CHF and the improvement in Global Business was a positive surprise. For FY20, management has provided guidance of lower sales but an EBIT in line with FY19 figures.

Good H1 20 with outlook unshaken by the pandemic

Sika published its H1 results which were better than our expectations with a positive sales growth of +2.9% in local currencies supported by the acquisition effect of +13.4%. The EBITDA margin was almost flat. For H2, management is confident of seeing positive organic growth. The 2023 strategic targets are still intact. We will be revising our numbers upwards.

Q1 20: Acquisition effect envelops COVID-19 impact

Sika has demonstrated strong growth of 15.4% in sales in Q1 20. This growth was backed by increased pricing, the acquisition effect of Parex, and the late impact of COVID-19 in the Americas and Europe. The company is implementing significant cost-saving methods to deal with the current situation, yet it has dropped its 2020 guidance pertaining to the uncertainties. The 2023 guidance is still intact. Our minor tweaks in the model following this release do not change our recommendation.

FY19 results in line

The FY19 results were in line with our expectations and the company has reiterated its 2023 targets. Management is confident about 2020 despite the Coronavirus fears in China, and believes that it will be able to achieve 10% growth 2020. It has further confirmed that a big M&A is a possibility as the Parex integration is almost over.

Inorganic growth this year for organic growth from next year

The group has announced its FY19 sales up 14.4%, with organic growth contributing only 3.3%. All regions showed growth with APAC being the strongest. Through five acquisitions, the group has laid the foundations for continued growth. It has set Strategy 2023 where it seeks to grow by 6-8% each year upto 2023. It is also aiming a higher EBIT margin of 15-18% in 2021 while, according to our estimation, it was ~13% in 2019.

Q3 19: as always just outstanding, +10% increase in target price expected

Following this earnings release, we will increase our sales forecast and leave unchanged the margin accretion. This will result in a higher target price by some 5-12% depending on our other changes in assumptions.

H1 19: satisfying H1 but guidance somewhat revised downwards

Sika registered a solid H1 19 but this was mainly thanks to acquisitions as the organic growth was at its lowest level over the last three H1s, with +3.1% vs +6.8% in H1 18 and +5.7% in H1 17. But the disappointing fact is the change in wording about the guidance, which is somewhat a negative. Overall, we will increase the target price by 5-10% in order to switch back to a Buy recommendation, as Sika remains our top pick.

Terminating coverage

Strong finish to 2022, upgrade to 2023

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25 January 2023 @HybridanLLP Status of this Note and Disclaimer This document has been issued to you by Hybridan LLP for information purposes only and should not be construed in any circumstances as an offer to sell or solicitation of any offer to buy any security or other financial instrument, nor shall it, or the fact of its distribution, form the basis of, or be relied upon in connection with, any contract relating to such action. This document has no regard for the specific investment object

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17 January 2023 @HybridanLLP Status of this Note and Disclaimer This document has been issued to you by Hybridan LLP for information purposes only and should not be construed in any circumstances as an offer to sell or solicitation of any offer to buy any security or other financial instrument, nor shall it, or the fact of its distribution, form the basis of, or be relied upon in connection with, any contract relating to such action. This document has no regard for the specific investment object