Lagercrantz reported solid numbers with sales and EBITA in-line our estimates. The EBITA margin was sequentially down but stronger on a year to year comparison. The cash flow was slightly weaker than expected driven by working capital build up but this is fluctuating between quarters and we expect continuous improvements ahead.

Lagercrantz closed two acquisitions after the quarter end of CP Global and Principal Doorsets. Both typical Lagercrantz acquisitions that build on the strong momentum the company has created in the UK since appointing a local M&A manager for the region. We are encouraged by the acquisition of Principal Doorsets which builds upon the acquisitions of Door & Joinery and Fireco in the same market. The companies will benefit from idea sharing ahead while being run as separate units according to the Lagercrantz operating model.

We raise our Base Case from SEK180 per share to SEK185 per share following the report. Lagercrantz continue to show solid EPS growth, and while we expect the organic growth rate to continue to be muted in the near term, we believe growth from acquisitions will continue to support good growth ahead and expect the company to deliver EPS growth of c15% in the coming years. With the positive share price development in the last months we think there is limited room for multiple appreciation ahead and that EPS growth will drive the stock price onwards in the long term.