Q2 preview - expect a solid quarter and guidance upgrade

Research evidence excerpt

Q2 preview - expect a solid quarter and guidance upgrade

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ram.mehta@jpmchase.com

with a modest impact from higher input costs, which will be passed on to J.P. Morgan India Private Limited

customers with a lag of 1-2 months. At group level, we forecast revenue of

€715mn (standard metal prices), down 1% y/y, and operating EBITDA of Specialist Sales contact details:

€106mn. Table 1 summarises our Q2 expectations. Sam Edmunds - Specialist Sales -

• Realistic prospects of guidance upgrade: Historically, NKT has been European(44-20) 7742-8733Industrials

conservative in setting the guidance which was often revised up as the year sam.edmunds@jpmorgan.com

progressed. This is also due to risks in the project nature of business, given that

Style Exposure the majority of revenues and profits come from the Transmission segment

where NKT has turnkey contracts. After a strong Q1 and solid Q2, we expect

NKT to raise guidance. The company is currently targeting €360-410mn in FY

Adj EBITDA which compares to €418mn JPMe. There is still a possibility that

NKT could start production before the start of 2027 on the new production

lines, which are currently under commissioning. It also had similar success last

time around when it executed a previous capacity expansion at the Karlskrona

factory. Under the POC accounting, it is the cost that matters for revenues and

profit, rather than actual production output (which lags revenues).

• Peers are indicating a new wave of Transmission projects starting next

year: We hosted Nexans and Prysmian management at our European Industrial

conference. Both the companies suggested solid market activity this year, with

the next wave of big-ticket projects to come up for award from early next year

onwards.