Sales increased by 24% year over year, and organic sales growth was 10% excluding currency effects in Q4. This was stronger than we expected. The adjusted EBITA margin was solid after a weaker Q4 and came in at c19.1% with adjusted EBITA growth of c5%. Net profit was negatively impacted by higher financing costs and a higher tax rate in the UK but earnings per share increased with c11.5%. The cash flow was also solid for the quarter with cash conversion of c72%. The net debt increased slightly due to the acquisition of JR Industries but we expect strong cash flows during the year ahead supporting a more active M&A agenda in the years ahead.

After a slump in 2022, Sdiptech has performed strongly during 2023 and again in the first quarter of 2024. We believe the company has a group of diversified niche businesses in different geographies with strong economics that will continue to perform strongly ahead. While some investors believe the debt level for the company is too high we believe a business such as Sdiptech with defensive characteristics can support a bit higher debt level than the average company.

We increase our Bear Case fair value per share from SEK180 to SEK200 and reiterate our Base Case of SEK380, and Bull Case of SEK580 per share leading to a fair value range of SEK200 to SEK580. The market’s reaction to the Q1 report was deservedly positive, with the share price up c10% on the day. We see decent organic growth, healthy margins and strong cash flows ahead and think the stock is attractive even after the positive share price reaction.