DistIT Q2: beat driven by solid cost control - ABG

Sales SEK 513m -2% vs. ABGSCe 523m
Adj. EBIT ~SEK 4m vs. ABGSCe -12m
Expect cons. est. to come up slightly
Q2'23 results

Q2'23 revenue came in at SEK 513m, down 16% y-o-y, and slightly below ABGSCe. Adj. EBIT came in at SEK 4.2m, up ~SEK 8m y-o-y. Gross margin adj. for FX came in at 21.6%, which is 1.9pp higher than we anticipated. On a segment basis, Aurdel missed on sales by 7% but beat on EBIT by ~SEK 15m. While Septon and Sominis beat sales by 12 and 6%, respectively, they missed by 52% and 8%, respectively, on EBIT. EFUEL came in line with our sales estimate of SEK 25m and lost SEK 2m less than we expected.

Thoughts and outlook
Overall, the report was better than we expected. While sales was ~2% lower than expected, the earnings beat shows that the company successfully controls costs. Overall, we believe that this report could serve as a data point that indicates that topline has bottomed. Yesterday, the company announced a cost savings programme that is planned to launch in Q3'23e, and is estimated to yield annual run-rate savings of SEK 30m, with SEK 7m being realised already in '23e. While we believe that consensus has already incorporated some opex savings in the unrevised estimates, we believe that these measures could sustainably improve profitability. Overall, we are optimistic on the long-term prospects for the various business areas, despite near-term cyclical, consumer-related headwinds.

Valuation and estimate revisions
The share is down ~80% YTD, and is trading at ‘23e-'24e EV/EBIT of 34-10x based on our unrevised estimates. Based on mechanical calculations following the report, we anticipate consensus to raise '24e-'25e EBIT estimates by low single-digits.Deviation tableSource: ABG Sundal Collier, Company data.

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