Careium: Strong top line in Q1 - ABG

Sales +10% vs. ABG & adj. EBIT margin 2% vs. ABG 4%
Small negative GM and positive NRI adjustments
Trading at EV/EBITA 11x on 2023e

Strongest quarterly sales in Careium’s history
Careium’s sales grew 29.3% in total and 13.6% organically due to 11,000 new subscribers (we expected 2,000) and product sales growth of 48%. However, the profitability was low. The gross margin (GM) was 39.2% (ABGSCe 40.5%) due to supply chain issues and sick leave in the quarter. Moreover, the quarter was pressured by an accounts receivable write-down of SEK 15m and restructuring costs of SEK 12.4m related to the UK. This pushed the reported EBIT down to SEK -24m. If we adjust for the UK-related costs and write-downs, the adj. EBIT was SEK 3.1m, for an adj. EBIT margin of 1.7% (we had expected an adj. EBIT margin of 4.0%). We also got more information about the restructuring of the UK, which the company expects will improve the profitability by SEK 35-40m p.a. We interpret this to mean that the EBIT will be around SEK 35-40m. Also, Careium estimates the transformation costs in 2022 to amount SEK 15-20m (excluding write-downs of accounts receivable). If we take the higher end of the range, SEK 7.6m is left, as SEK 12.4m has already been allocated to the restructuring in the UK so far this year. We expect most of this to come in Q2’22 and the rest in Q3’22.

Lower GM and adjust costs related to UK
We maintain our sales estimates but lower our GM by 2pp for Q2’22 and Q3’22 and 1pp for Q4’22 due to the supply chain issues and price rises. Moreover, we slightly adjust our NRI’s related to the restructuring costs in the UK to sum up to SEK 20m (we previously expected SEK 16m) in 2022. In sum, we expect an adj. EBIT margin of 4%, 5.5% and 7.5% for Q2, Q3 and Q4 2022. We also lower 2023e EBIT to SEK 40m to match our new EBIT expectation.

New fair value range of SEK 19-38 per share
With our estimate revisions, we lower our fair value range to SEK 19-38 (28-44), which corresponds to an EV/EBITA of 14x-24x
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