Q2 review. Encouragingly, Q2 sales were again in line with our forecast, and run-rate sales are now only 15% below the company's 2022 target. Adj. EBITDA of SEK3.3m was below our SEK4.6m forecast, but we expect earnings to be lumpy given Nexam Chemical is in a growth and commercialisation phase, where margins will be driven by the sales mix.

Building its ESG credentials. Announcing its first fibre recycling order in Q2, where adding Nexam Chemical's additive increases the degree of recycled material in the end-products, we believe the ESG case is growing, to which investors could assign a higher valuation. We believe PET outside the foam business could offer a SEK200m sales opportunity by 2025 (50% of our 2023 forecast), while our scenario analysis indicates SEK9/share in additional value if the recycling opportunity is successfully commercialised. However, we acknowledge that uncertainty is still high, and do not include any breakthrough in our estimates.Estimate changes. We have fine-tuned our 2021-2022e sales following the results, and cut our EBITDA by 7-5% to reflect investments in the organisation.Fair value raised to SEK15-20, reflecting prospects of a re-rating on improved ESG credentials. Our fair value is based on a 10% premium to peers' 2023e EV/sales of 3.6x. We believe Nexam Chemical could screen favourably in the EU Taxonomy, noting that PET foam sales to wind farms alone could yield a 46% alignment, versus our estimate of a Nordic Capital Goods sector average of 11%.
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Best regards 
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Viktor Trollsten | DNB Markets | Equity Research
 
DNB Bank ASA, Filial Sverige
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