# Neodecortech: Business booming

- Link: https://www.directorstalkinterviews.com/neodecortech-business-booming/4121022463
- Published: 2021-09-14T12:02:09+01:00
- Author: Amilia Stone

1H21 results from **Neodecortech** (NDT) confirmed the trend of the first quarter.
Revenue was up 41% vs. 1H20, but, more tellingly, it was up 21% vs. 1H19, demonstrating
the strength of NDT’s new products and its European markets. That strength has continued
into 3Q. We have raised our revenue forecasts significantly, as well as our earnings
forecasts, although there is some offsetting of additional costs, as the price of
energy and raw materials has risen sharply.

 * **Trading:** Decorative paper, bolstered by its new higher-margin products – 
   EOS and PPLF – saw revenue up 75% and margins up to 14.3%, their highest for 
   three years. This was achieved partly by passing on higher input costs and despite
   shortages of resin affecting production.
 * **Trading 2:** Cartiere, the paper business, also saw strong revenue gains compared
   with both 2020 and 2019. Pulp prices were driven higher by strong demand in both
   China and Europe, but the company comments that this trend seems to have come
   to an end, and prices are expected to stay steady or decline in coming months.
 * **Valuation:** Neodecortech has performed strongly but remains relatively cheap
   on our forecast multiples. At a ca.20% EV/EBITDA discount to its nearest quoted
   peer for both 2021E and 2022E, the market is still over-discounting for its smaller
   scale, in our view. Our central DCF valuation comes out at €6.74 per share, up
   from €5.58.
 * **Risks:** The key risk in the immediate term is the economy slowing down after
   a very strong bounce. Raw material price rises have been passed on so far but
   must have an impact on overall demand. There is the possibility of more direct
   competition from Chinese manufacturers in the medium term.
 * **Investment summary:** Neodecortech specialises in high-quality décor paper 
   and plastic film, and has strong relationships with its customers. It is increasing
   investment in further improvements in its machinery and new technologies. As 
   familiarity with the company grows (its STAR listing is helping here), and as
   the new products comprise a larger proportion of the business, we would expect
   the valuation discount to continue to narrow. The business is operating at full
   capacity currently, with good forecast orders. The very strong performance since
   the worst of COVID-19 shows what a resilient and high-quality business it is.

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