Polygiene Group: Scaling up with stronger margins
Research Update
2025-02-14
07:30
Analyst Q&A
Closed
Fredrik Reuterhäll answered 2 questions.
Polygiene Group delivered better than expected Q4 report on all key metrics. Beat on sales, improved profitability lead to strong cash flow. Polygiene have a strong operational momentum going into 2025.
Fredrik Reuterhäll
Rasmus Jacobsson
Contents
Net sales were up 45% y/y to SEK45m, exceeding our estimate of SEK37m due to another strong beat from Polygiene. Polygiene sales came in at SEK25.7m vs. our estimate of SEK18.5m, while Addmaster recorded SEK19m, in line with our estimate of SEK19m. The gross margin was 76%, driven by strong cost control and the scaling effect from Polygiene. EBITDA reached SEK5.9m, corresponding to an EBITDA margin of 13.2% (-20% last year), surpassing our estimate of SEK4.3m. Operating cash flow after changes in working capital came in at SEK10.4m (SEK1.9m).
We expect the operational momentum to carry into H2 2025, after which Polygiene Group will face tougher comparisons. Redeye has raised its growth forecast by 6%, projecting sales growth of 11% to SEK174m in 2025. Additionally, we are increasing the estimated gross margin by 1 percentage point to 71% for 2025, as we expect Polygiene to account for approximately 54% of total sales. Given that Polygiene has a higher gross margin than Addmaster, this shift supports the margin increase.
Redeye raise the valuation range c13% to SEK5.5-18, with a Base Case of SEK15 indicating an upside of 15% from the share price of SEK13. Based on our estimates, Polygiene Group trades at an EV/EBITDA of 14.5x and an EV/Sales of 2.3x for 2025e.
| Key Financials | ||||||
|---|---|---|---|---|---|---|
| SEKm | 2022 | 2023 | 2024 | 2025e | 2026e | 2027e |
| Net Sales | 173.6 | 113.1 | 156.9 | 173.9 | 196.7 | 220.4 |
| Sales Growth | -4.3% | -34.8% | 38.8% | 10.8% | 13.1% | 12.1% |
| Gross Profit Margin | 66.1% | 73.2% | 70.8% | 70.7% | 70.1% | 69.5% |
| EBITDA | 20.3 | -5.2 | 22.9 | 28.1 | 33.5 | 36.4 |
| EBITDA Margin | 11.7% | -4.6% | 14.6% | 16.2% | 17.1% | 16.5% |
| EBIT | 16.0 | -10.5 | 17.0 | 26.4 | 31.6 | 34.2 |
| EBIT Margin | 9.2% | -9.3% | 10.8% | 15.2% | 16.1% | 15.5% |
| Net Income | 24.9 | -0.98 | 15.8 | 20.9 | 25.1 | 27.2 |
| EV/Sales | 1.4 | 2.2 | 2.4 | 2.3 | 2.0 | 1.7 |
| EV/EBITDA | 11.9 | -49.0 | 16.5 | 14.5 | 11.6 | 10.1 |
| EV/EBIT | 15.2 | -24.0 | 22.3 | 15.5 | 12.3 | 10.7 |
Case
A proven innovator in antimicrobial solutions
Polygiene Group specialises in developing and selling innovative solutions for treating textiles (Polygiene) and surfaces (Addmaster) to control odours, bacteria and viruses. Its products reduce unpleasant odours in garments and provide antimicrobial protection for various surfaces. Among its more than 500 customers are well-known brands such as Adidas, Dr. Scholl’s, The North Face, CAT, Dyson and NIO.
Polygiene The company employs a co-branding model, partnering with established brands to integrate its solutions into a wide array of products, enhancing brand value and consumer appeal. Moreover, with Polygene’s products integrated into the fabric, there is less need for washing since the clothes do not retain odours. Addmaster targets industrial partners across diverse sectors, such as automotive, healthcare and manufacturing. Moreover, Addmaster helps its clients meet regulatory requirements, which adds significant value to their customers value chain.
Redeye estimates Polygiene Group will grow sales by 13% per year, outpacing growth in the underlying market. First, Polygiene Group has a strong position with long-standing, recurring customer collaborations that we believe can be further developed. Second, the company is relatively small in a large market that is also growing.
Evidence
Innovative technologies
The launches of StayFreshBio, a plant-based antimicrobial technology, and its latest innovation, ShedGuard, showcase Polygiene Group’s commitment to ongoing innovation. During the pandemic, the company re-launched ViralOff in April 2020, seeing significantly increased sales thanks to the enormous demand for products effective against SARS COV 2, the virus that causes COVID-19. The continuous launch of new products is proof that management is alert to and capable of seizing opportunities in a changing competitive landscape and effectively capitalising on such opportunities.
Supportive Analysis
Polygiene Group’s impressive partner list strengthens the company’s market position. From around 25 partners in 2009, this has grown to more than 500 today, including international customers such as Adidas, Athleta, The North Face, Diesel, Prada, Calvin Klein, O’NEAL, Dyson, NIO, Hawaiian Airlines and CAT. The partner list is a sign of strength, as these customers do not take lightly the decision to “lend” their brand; the collaboration must add further potential and value to their own brand. Its impressive partner list not only enhances the company’s market position but also condenses the sales process with new customers.
Challenge
Competition
Competition has increased somewhat in recent years, and today, there are a number of competitors offering treatments similar to Polygiene Group’s. However, what speaks in the company’s favour is its extensive experience and the high frequency of new products it develops and launches.
Communicating, educating and informing producers
Communicating, educating and informing producers and end-consumers about the contents of its products and their environmental impact is crucial for understanding the products and their benefits. Polygiene Group meets the environmental and health requirements of regulatory authorities for its additives in the EU, the US and rest of the world (ROW). Should environmental regulations or requirements change, it might need to implement internal changes that could affect operations through higher costs and altered conditions.
Valuation
Base Case of SEK15
Our valuation range is between SEK5 to SEK16, with a Base Case of SEK15 with assumptions it will reach a EBITDA-margin of 16% 2025e. Based on our estimates, Polygiene Group trades at an EV/EBITDA of 14.5x and an EV/Sales of 2.4x for 2025e.
Disclosures and disclaimers
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