Danske Bank: NKT – Q1 21 initial reaction

NKT (OW) is out with a fairly strong Q1 21 which landed above market expectations. The result demonstrated continued recovery in all NKT’s business lines. As the group is back in full execution mode on its large high voltage order backlog, the group managed to improve its revenues by 23% y/y (excl. rising commodity price effects). Positively, NKT is now also showing recovery in the service and application segment and in NKT Photonics. The latter is especially positive, as this asset has been targeted as being up for sale at some point in the future. In combination, NKT’s clean EBITDA was up 263% y/y to EUR31. The FY outlook was repeated (EBITDA of EUR80-110m), although NKT now states that it expects to see Photonics’ earnings in the upper range of the guidance. NKT’s leverage deteriorated marginally due to higher working capital on the back of inventory build ups. This led to NKT reporting a net debt position of EUR31m vs. a net cash position of EUR26m a quarter ago. On this background, we see adj. net debt to EBITDA improving slightly to 2.9x from 3x sequentially. NKT’s liquidity remains very strong compared to the short time-span till 1^st call date on its outstanding hybrids (September 2022). Overall a credit positive report from NKT.