Careium: Growth in Q2, but margin will improve later - ABG

Q2 report due on 15 July Expect continued y-o-y growth, but not as strong as in Q1 Lower ’22 EBITA estimates, trading at 9x ‘23e EV/EBITA Continued growth and focus on the UK Although Careium delivered strong top-line growth of 29% y-o-y in Q1 (of which 13.6% was organic) on the back of a strong pipeline and the roll-out of pending subscription contracts, it faces slightly tougher growth comps this quarter. That said, we expect the positive trend of organic growth in subscription contracts to continue and estimate +5,000 new paying contracts in Q2’22e. In addition, we see supply chain problems will primarily be affecting Careium through price increases rather than component shortages, meaning the negative effects will impact the GM rather than the top line, just as in Q1’22. The UK restructuring remains a key focal point, where we expect things to progress according to plan with the majority of the remaining NRIs in Q2e. We assume the EBIT margin improvement from the UK restructuring will be visible in the latter part of the year, while we expect Q2e to remain weak. In total, we estimate sales and adj. EBITA of SEK 168.8m and 6.0m, respectively, corresponding to y-o-y growth of 15% and an adj. EBITA margin of 3.6%.

We lower our adj. EBIT assumptions for 2022e Following a change of analyst covering Careium, we have made a review of our estimates. Our new ‘22e adj. EBITA margin is 4.4% and is expected to gradually improve to 9.3% in 2024e.

Share price sharply down YTD, trading at EV/EBITA 9x ‘23e YTD, the share is down 58%, most likely on lagging profitability due to the UK situation with delayed synergy effects from the acquired entities. Just looking one year out, the share is trading at an EV/EBITA of 9x for ‘23e. We adjust our fair value range of SEK 12-34 per share (19-38) following our lowered ’22e EBITA, which corresponds to EV/EBITA of 8x-18x for ‘23e.

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