Another Strong Quarter of Organic Growth for Novozymes; Guidance Upgraded Again

Wide-moat Novozymes reported second-quarter EBIT of DKK 1.1 billion, up 12% versus 2021 and about 5% above the company compiled consensus. Organic sales growth of 10% matched the first quarter and was ahead of consensus expectations for 7.4%. A strong first half has led Novozymes to upgrade 2022 guidance. Organic growth is now expected to be 6%-8% (4%-8% previously) with an EBIT margin of 26%-27% (25%-26% previously). However, the margin upgrade is primarily due to a nonrecurring accounting gain. We have boosted our 2022 estimates but believe some of the demand has been pulled forward from 2023. Consequently, we are maintaining our DKK 375 fair value estimate. At current levels, the shares look overvalued.