2Q Preview: HSD Organic Order Intake But Limited EBITA Margin Progression

Research evidence excerpt

2Q Preview: HSD Organic Order Intake But Limited EBITA Margin Progression

rganic revenue growth rate in 2Q,

with Products and PC&V driving the performance. Within PC&V there is likely to be a slightly

adverse mix effect as the OE orders secured in 4Q25/1Q26 are delivered while in Service, the

real benefit of Upgrades & Modernisations does not kick in until 2H. In Products, we forecast

revenue just under the DKK 2.8bn to DKK 3.0bn run rate required for break-even. This leaves us

modelling only a slight improvement in Adj EBITA margin to 15.5% (1Q26 15.2%), at the bottom

end of the 15.5%-16.5% guidance range for the year. Consequently, our 2Q Adj EBITA forecast

of DKK 547m sits 7% below Visible Alpha consensus.

Some improvement in operating cash-flow: We model operating cash-flow of cDKK250m,

improving from a surprisingly strong 1Q, but reflecting the ongoing investment in Inventory

to support revenue growth later in the year. This results in Net Debt:EBITA of 0.7x, well below

the group's target <2.0x range. We do not see much deviation from this level going forward,

meaning that there is good availability of the Balance Sheet to do infill M&A.

Forecast changes: Updating for the first time since our 1Q Preview sees LSD/MSD upgrades

across most elements of our P&L, with slightly larger moves at the EPS level, especially in

FY26F due to the HQ disposal profits recognised in 1Q.

Valuation: FLS trades on FY27F EV/EBITA of 11x, which is a 30% discount to the global Mining

Equipment peer group. We believe that delivery of improved margins over 2H26F, coupled with

an anticipated uptick in orders, can help drive a re-rating of the stock, with our PT of DKK 610

equivalent to an FY27F EV/EBITA of c13x.

David Farrell * | Equity Analyst