Assa Abloy Earnings: 7% Fair Value Increase on Strong Execution of Acquisition Pipeline Year to Date

Organic growth eased for wide-moat Assa Abloy in the second quarter to 3%—from an elevated 8% in the first three months of 2023—aligning with our full-year expectations for more normalized locking system demand in 2023 after an exceptionally strong showing in 2022. Nonetheless, Assa Abloy’s hastened pace of bolt-on merger and acquisition activity year to date leads us to raise our fair value estimate by 7% to SEK 320. A time value of money adjustment also contributes to the fair value estimate uplift. We increase our full-year EBIT and EPS estimates by a respective 10% and 7%—to SEK 21.3 billion and SEK 10.9—with bolt-on acquisitions adding handsomely to 2023 earnings. Assa Abloy shares screen attractively, trading at an almost 20% discount to our revised fair value estimate.