Careium: Set to underline the recovery - ABG

Another solid quarter awaits after the turnaround in Q4'22
Limited revisions - we forecast a resilient outlook for Careium
Trading at 8-4x '23e-'25e adj. EV/EBITA


Q3e: solid growth with the margin holding up well

We forecast Q3 sales and adj. EBITA of SEK 214m and SEK 18.0m, respectively, or y-o-y growth of 22% (17% organic) and a margin of 8.4%. Since the significant pressure around this time last year, Careium has improved rapidly, driven partly by the completed UK hive-up, and seems to be staying on the new normalised levels, with margins close to double digits while maintaining attractive organic growth in the mid-teens. Given its non-cyclical characteristics, i.e., a customer base that includes e.g., governments, coupled with some contractual price increases, we see few reasons not to expect a maintained strong top line. Furthermore, the implemented efficiencies have proved resilient after three consecutive quarters with decent margins, making us comfortable to estimate continued strong earnings growth momentum, still with room to expand further over the coming years. Free cash flow was strong in H1'23, supported by a working capital release in Q1'23, but we see room for stronger FCF in the latter part of the year as well on stable capex coupled with a further release of WC, improving the leverage (lease-adj.) from 3.9x by the end of '22, to 1.3x by the end of '23e.

Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/careium/Equity-research/2023/10/careium---set-to-underline-the-recovery-/