Elanders: Improvement in Q2e, bigger hopes for H2 - ABG

Reasons to be optimistic after slow start to the year
We expect Elanders to report Q2 net sales of SEK 3,681m, +7% y-o-y (-4% organic, +1% FX, +10% M&A). Demand has improved following the challenges of Q1, with a notable recovery in Electronics, while the Fashion segment, particularly in the US, remains sluggish. The UK market remains subdued, but Bishopsgate should outperform Kammac due to its niche exposure. Meanwhile, we are optimistic about Elanders’ efforts to address overcapacity, which could have a slight positive effect on Q2, although the contract closures are still likely to weigh y-o-y, despite easier comps. For Supply Chain Solutions (SCS), we estimate an adj. EBITA margin of 6.0%, slightly down from Q2’23 (6.2%), although we forecast a clear improvement in H2 due to acquisitions and increased efficiency. For Print & Packaging Solutions, we forecast continued strong demand with 7% organic growth and an adj. EBITA margin of 7.3% (6.2%). Overall, we expect adj. EBITA of SEK 222m, for a margin of 6.0% (6.1%).

Minor estimate changes
We make no meaningful estimate changes to our 2024e-2026e sales and EBITA. However, we lower our net profit estimates due to higher anticipated interest rate expenses in 2024e-2025e. We are 1% above the FactSet consensus on 2024e sales, and in line on adj. EBITA. For Q2, we are 2% above on sales and 1% above on adj. EBITA.

Attractive valuation and high-potential acquisitions
We find value support at 12x 2024e adj. EBITA. The overcapacity, combined with leverage on an improved market and potentially lower interest rates, provides significant upside potential. We expect strong earnings growth in the upcoming quarters and are optimistic about contributions from recent acquisitions. Despite higher leverage, we believe the balance sheet remains solid and see good leeway