Novozymes Earnings: Organic Growth and EBIT Margin Ahead of Consensus

Wide-moat Novozymes reported third-quarter EBIT before special items of DKK 1.2 billion, down 10% versus 2022 but 6% ahead of consensus. The EBIT margin, at 26.6%, marked a sequential improvement compared with the 24% reported in the second quarter and was 130 basis points ahead of consensus. Organic sales growth was 8% (compared with 6% in the consensus), driven by a 3% growth in volume. This growth was supported by the gradual reduction in destocking in the food-related sectors and increasing demand for sustainable biosolutions. With results beating consensus for both organic growth and EBIT margin, the share price was up 6% intraday at the time of writing. The guidance for 2023 remains unchanged, however, with organic growth anticipated to be in the range of 4% to 6%, primarily driven by pricing. As the fourth quarter progresses, management anticipates further stabilization in destocking activities within the food-related sectors. We confirm our DKK 395 fair value estimate. At current levels, the shares look undervalued.