Sales increased by 35% year over year, and organic sales growth was 20% excluding currency effects in Q4. This was stronger than we expected. The EBITA margin didn't keep up driven by a negative sales mix and slight losses within two business units but was still at solid levels of c18.5%. Net profit was negatively impacted by higher financing costs and a higher tax rate in the UK. The cash flow was solid for the quarter but with lower cash conversion than normal driven by the strong organic growth. The net debt continue to be lowered and we expect strong cash flows during the year ahead supporting a more active M&A agenda.

Some investors have complained about Sdiptech's method on calculating its net debt to EBITDA metric and Sdiptech has now changed to the method most peers use which is to compare net debt against the rolling-twelve-month EBITDA. It also updated it's metric from EBITA* to Adjusted EBITA. More importantly there was a stronger emphasis on return on capital employed in the report. While this may sound like unimportant changes we believe the updated communication will be well received by investors.

We reiterate our fair value range with a Base Case of SEK380, a Bear Case of SEK180 and a Bull Case of SEK580 per share. The market’s reaction to the Q4 report was negative, with the share price down c10% on the day - an overreaction according to us. We expect 2024 to be a year of normalization on the back of stellar organic sales growth in 2023, and we see decent organic growth, healthy margins and strong cash flows ahead.