DistIT: Unfavourable conditions for Aurdel persist - ABG

- We cut '24e sales and EBITDA by 2% and 21%, respectively - Headwinds for Aurdel likely to persist - '25e EV/EBIT ~10x

What to expect in Q2'24
We anticipate Q2'24 sales of SEK 392m and EBIT of SEK -27m, down from our previous estimates of SEK 424m and SEK -21m, respectively. Once again, we cut our estimates to reflect the continually tough consumer conditions that are adversely affecting Aurdel. Moreover, the company's current restructuring efforts, specifically in Aurdel, could temporarily weigh on earnings. We expect operating cash flow of SEK 20m with working capital releases of SEK 51m.

Estimate changes
We cut '24e sales and EBITDA by 2% and 21%, respectively, due to unfavourable conditions for Aurdel. While it is challenging to assess when consumer sentiment will turn for the better, comps are becoming easier. Therefore, we continue to expect a return to positive organic growth in H2'24e. That said, Aurdel is currently simplifying its offering by focusing more on its own brands. Therefore, we only expect 1% organic growth in '25e, as external brands are being discontinued. Over time, these efforts should meaningfully raise gross margins on a group level, and we believe that this will lower gross margin volatility in the future.

Implied valuation
Based on our revised estimates, the company is trading at '25e EV/EBIT of ~10x.

Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/distit/Equity-research/2024/7/distit---unfavourable-conditions-for-aurdel-persist/