In this equity research report, analysts Rahil Hussain and Christian Carlsson take a closer look at Arla Plast AB. Arla Plast is a Swedish producer of extruded plastic sheets, serving a wide range of industries with different applications. The market underestimates the Company’s stability, improving margins and strategic shift from volume to value. Arla Plast’s business model transition toward higher-value products and direct to-customer relationships is estimated to increase EBIT margins from the current 8% to 11% by 2027E. Based on an equally weighted DCF and peer valuation using a target multiple of 8.2X 2027E EBIT, a target price of SEK 68.3 per share is implied, corresponding to an upside of 42.9%.
Investment Thesis
● Margin expansion from Nudec integration
● Structural advantages in a growing market support 5% top line CAGR
● Margin upside through direct to-customer transformation