B3 Consulting Group: Easy comps to start in Q4 - ABG

- '24e-'26e adj. EBITA down 3-2%
- Increasingly likely that Q3'24 will be the trough
- NTM EV/EBITA of ~8x

Q4 could be a turning point
Q2 was another challenging quarter for B3, with sales and EBITA declining by 11% and 61% y-o-y, respectively. Compared to FactSet consensus, B3's sales were 2% below expectations while adj. EBITA missed by 19%. The utilisation rate increased sequentially, but this is largely due to a reduction of unstaffed FTEs. Additional evidence in terms of improved utilisation on a like-for-like basis is required in order to extrapolate improving conditions. As comps become easy in Q4 and as the number of FTEs is reduced, we see potential for organic earnings growth y-o-y in Q4.

Adj. EBITA down 3-2%
We cut '24e-'26e sales by 1% and cut '24e-'26e EBITA by 3-2% on the back of the report, which did not deviate meaningfully from our estimates. We revise the dilution that we estimate will occur due to the B3 Poland acquisition, hence we only make marginal EPS revisions for '25e-'26e despite a reduction in net income estimates. It is likely that we will see a representative run-rate utilisation in Q4 when the FTE reduction is complete. Our view of the company remains unchanged because we assess that the current problems are sector-wide rather than company-specific.

Valuation
Based on our revised estimates, the company is trading at ~8x NTM EV/EBITA, which is ~20% below current peer multiples and ~25% below the historical average for Nordic IT services peers. We reiterate our fair value range of SEK 130-200.

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