After a blockbuster Q2 led by the newly-added Healthcare division, Chargeurs’ Q3 results were once again bolstered by the strong sales performance in the health-related activities, this time accompanied by a welcome recovery in protective films (also health-related). The positive quarterly performance supports the group’s upgraded FY outlook, which we see as easily achievable.

Chargeurs’ Q3 revenues rose 12.3% lfl (15.9% reported) to €169.7m on the back of strong sales at the Healthcare Solutions division, which more than offset the still affected, but improving, core businesses (Protective Films in particular). The 9M sales stand an impressive +45.7% above the 2019 levels at €688.2m, driven by Healthcare Solutions (€300.6m), while the core businesses have significantly narrowed the sales contraction in Q3 compared to their ytd performance.

Revenue break-down by division

Source: Company reports

Healthcare leads the way once again

The €46.7m top-line contribution from the newest addition to Chargeurs’ diversified sector exposure has been the definite driver for the group’s quarterly outperformance. The company has leveraged the expertise and industrial capacity from its core protective films, textiles and technical substrates businesses to solidify its health-related offering…to great results.

Based on the Q3 performance, we see our €312m forecast for the CHS as a low bar to clear. The substantial capacity additions that will result from the new 16 production lines covered by Chargeurs’ new €8m capex plan should support the division’s sustainable sales development in 2021 and beyond.

Protective films nearly out of the woods

Among the core businesses, the Protective Films division showed a solid recovery in Q3, with sales declining by just 1.9% lfl to €67.1m. The rebound was also driven by the health industry, as the division supplies high quality protective films used to protect healthcare equipment during transport, in addition to plexiglass needed to ensure social distancing mandates. We see these trends enduring through Q4 which would sustain a better FY sales performance than the 15% yoy contraction we are currently anticipating.

Other core businesses still face a challenging context

The activity at PCC Fashion Technologies continues to be significantly affected by weakened demand in China and Hong Kong for high-quality interlining, with the global rebound in fashion being fast-fashion-led as evidenced by the positive surprises at H&M, Zalando, among others. Divisional revenues decreased 29.5% to €32.9m during the quarter and we expect them to remain weakened in Q4. The current fashion industry’s dynamic also explains the poor performance at CLM (-53.6% in Q3 to €9.8m).

Lastly, Museum Solutions (€13m) benefited from scope effects following the integration of D&P, Hypsos and MET, while the historical technical substrates activities remains severely weakened due to the decline in retail and conferences/trade-shows; among the most affected industries by lockdown restrictions.

Following the strong Q3, the group has raised once again its FY guidance, now expecting a top-line of +€800m (we currently forecast €812m) and a recurring operating profit of +€70m.

Based on the Q3 release, we will raise our FY revenue estimates for CHS and CFP, which will mechanically raise our recurring operating income forecasts near the €70m level targeted by the company. We maintain our positive opinion on the stock, supported by the improved FY20 outlook and quite conservative FY21 assumptions.

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