• New targets: >8% org. growth, >12% EBITA margin, >15% ROCE
• Growth and margin targets imply 15%/12% upside to '26e ABGe/IR cons
• CMD at 13:00 CET, webcast link here

New targets presented ahead of CMD

Nolato presents new financial targets ahead of its Capital Markets Day today at 13:00 CET (webcast link). The company aims for 1) organic growth excceding 8% per year over a business cycle (no prior growth target), an EBITA margin exceeding 12% over a business cycle (up from >10%); the '24 EBITA margin was 9.9%, and we have 10.6-11.0% for '25e-'27e, and 3) a ROCE exceeding 15% over a cycle (no prior ROCE target); the '24 ROCE was 12.4% and we have 13.5-13.8% for '25e-'27e. The dividend policy (>50% of EPS) is kept unchanged, while the prior targets of 35% equity/assets and 75% FCF/EBIT are removed in favour of the mentioned growth and ROCE targets.

Growth and margin targets imply upside to IR cons

Assuming Nolato grows 8% per year over the coming two years and reaches a 12% EBITA margin in '26e, i.e. the low end of its new growth and margin targets, it would imply a 15% and 12% higher '26e EBITA than our estimates and the latest IR consensus, respectively. As such, assuming the company can provide clarity on how it intends to achieve the new targets, we expect positive consensus estimate revisions following the CMD.

A sign that the ship has stabilised

Following a couple of difficult years where earnings were negatively impacted by pandemic effects, supply chain disruptions, high customer inventories, and the ramping down of the VHP business, we argue that Nolato is now in a much more stable place. The leverage has also come down to 0.4x ND/EBITDA (ex. leasing and pensions), which creates opportunities ahead for organic growth investments and M&A.