Mullen Group Ltd. T.MTL.DB

RBC

[retiredcf]

More potential for a future bump in target. GLTA

July 21, 2022

Mullen Group Ltd.

Q2 results well above; guidance increased significantly; expect results to be very well received

TSX: MTL | CAD 11.74 | Outperform | Price Target CAD 15.00

Sentiment: Positive

Our view: Q2 results came in well above our and consensus expectations across the board (Q2 EBITDA of $94MM vs. cons. $66MM). Overall, a very impressive quarter for MTL. Guidance was also raised to $300MM (from prior $260MM) and meaningfully above consensus coming into the quarter of $264MM (RBC: $266MM). The increase to consensus was mainly on the Q2 beat but nevertheless represents a positive, in our view, and implies H2 EBITDA of $146MM versus prior H2 consensus $139MM. Moreover, mgmt noted that they expect freight demand to remain strong despite rising rates and inflationary headwinds, and that solid energy prices will support demand in Specialized & Industrial Services. However, mgmt expects future M&A activity will be delayed due to economic uncertainty. Overall, a very positive Q2 print, which we expect to be very well received.

First impression

Q2/22 results well above consensus. MTL reported adjusted EBITDA of $94MM, above consensus $66MM (RBCe: $64MM). Revenue of $522MM was well ahead of consensus $456MM (RBCe: $449MM). Margins also came in above on solid pricing. Highlights by segment as follows, with details shown in Exhibit 1.

• LTL – EBITDA above (EBITDA $42MM; RBCe $26M). Revenue was up +66% Y/Y to $211MM (RBCe: $178MM) due to M&A, fuel surcharge and pricing. EBITDA margin of 20.1% was above our 14.5% due to rate increases and better lane density.

• Logistics and Warehousing (L&W) – EBITDA above (EBITDA $31MM; RBCe $25MM). EBITDA was higher due to internal growth and reflecting better margins driven by higher pricing.

• Specialized and Industrial Service – EBITDA above (EBITDA $21MM; RBCe $13MM). EBITDA was higher y/y due to greater demand and price increases within several Business Units as improved commodity prices resulted in greater activity levels as well as the strong performance at Canadian Dewatering.

• U.S. & International Logistics – EBITDA in line (EBITDA $2.2MM; RBCe $2.0MM).

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