Embellence Group: D2C unit economics could lift gross margins - ABG

Q3 report due 24 October, we evaluate D2C potential
We forecast net sales of SEK 186m, EBITA of SEK 28m
We reiterate our fair value range of SEK 33-40


Q3e: EBITA +4% y-o-y, driven by strong gross margin

For Q3e we expect sequentially tougher growth comps to result in a growth slowdown. Organic growth of 3% (for net sales of SEK 186m) is 8pp below the growth rate of Q2, as sell-in of Artscape products should have a less-positive effect. Gross margins could remain strong at 59% (+140bp y-o-y), driven by high capacity utilisation in the factory after strong external manufacturing sales momentum (we forecast +65% y-o-y in Q3e) and a lower share of Borosan sales. The SG&A ratio could offset somewhat at -50bp y-o-y, as strong Borosan sales in Q3'23 carries a lower opex ratio in general. All in all, we forecast a SEK 28m EBITA, +4% y-o-y, for a 15% margin.

Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/embellence-group/Equity-research/2024/9/embellence-group---d2c-unit-economics-could-lift-gross-margins/