Careium: Dissapointing sales, but solid EBIT - ABG

- Q3 sales -6% below our ests. at SEK 202m, for -8% org. growth
- EBIT +29% vs. ABGSCe, but FCF lower than expected at SEK 3.3m
- Trading at 9.5x '25e EV/EBITA

Q3: Product sales lower than expected, but solid profitability
Careium delivered sales of SEK 202m (-6% vs ABGSCe 214m), corresponding to y-o-y organic growth ex. FX of -8% (-7pp vs ABGSCe -1%). Segment wise, service sales was SEK 164m (4% vs ABGSCe 159m), and product sales was SEK 37m (-32% vs ABGSCe 55m). The gross margin came in at 43% (1pp vs ABGSCe 42%), +1.1pp q-o-q and -0.7pp y-o-y), negatively impacted by lower GM in the UK, but offset by higher service sales. Opex came in at SEK -70m (9% vs ABGSCe -77m), on lower than expected admin costs. EBIT amounted to SEK 17m (29% vs ABGSCe 13m), for a margin of 8.2% (ABGSCe 6%, 9.5% in Q3'23). As previously communicated, the market delays have had a negative impact on both the Nordics (0.5% y-o-y, with product sales -60% y-o-y) and the UK & Ireland (-19% y-o-y). While we are disappointed by the low sales, we are encouraged by the earnings beat. Furthermore, Careium states that the launch of its new platform i-Care Center (ICC) will generate annual savings of ~SEK 10m and that it is confident of achieving its FY24 target of 5-10% organic growth and 7.5-10% EBIT margin.

Cash flow lower than expected
FCF ex. M&A in Q3 amounted to SEK 3.3m. This is an increase of SEK 13m y-o-y (-9.8m Q3'23) and SEK 2.8m q-o-q (0.5m Q2'24), with a change in WC of SEK -16m. While the cash flow is lower than expected, the market delays could indicate unsurprising inventory build-up, and we are encouraged by the improvements.

Valuation and conference call details
On our pre-Q3 estimates, the share is trading at 9.5x-7.7x ‘24e EV/EBITA adj. In addition, we expect more details about Q3 on the conference call at 12.00 CET.

Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/careium/Equity-research/2024/10/careium---dissapointing-sales-but-solid-ebit/