Underlying FX adjusted sales increased by 4% y/y to SEK1 056m (1 001), slightly below our forecast of SEK1 114m. While Other Markets roughly matched our forecast, Main Markets had slower growth than we anticipated. EBITA (adjusted for SEK13m in M&A costs and a revaluation of an earn-out) came in 7% short of our expectations. While Other Markets beat our forecast somewhat, thanks to a better-than-expected margin, Main Markets was 8% below due to lower sales, as the margin roughly matched our expectations. Management sees a mixed demand situation at the start of 2024. Some customers are seeing reduced demand while others continue to grow. However, management believes its position and strategy enable Hanza to grow organically despite softer economic conditions. Nevertheless, it is a somewhat softer picture relative to Q3.

In conjunction with the CMD, Hanza raised its 2025 sales and EBITA margin targets. While an increase of the previous SEK5bn target was expected following the acquisition of Orbit One, the new SEK6.5bn target implies high organic growth (11.3% CAGR relative to 2023 pro forma) or further M&A or a combination of both. The increase in the EBITA margin target from above 8% at the end of 2025 to above 8% in the full year 2025 might seem defensive, considering Hanza’s 8.4% EBITA margin in 2023. However, 2023 was a very strong year for Main Markets margin-wise, and with Orbit One joining the numbers (6.0% EBITA margin in 2023) along with a somewhat softer market, we believe it makes sense. Also, the target stipulates a minimum of 8%.

We lower our Base Case somewhat to SEK 90 (92) on the back of slightly reduced short-term forecasts. Our long-term assumptions are left roughly unchanged. Despite the recent strong operational performance, with high growth and improving margins during 2023, Hanza is still trading at a discount (8x EBIT 2024) to the average (10x EBIT), although often bigger manufacturing service companies.