Embellence Group: Diversification is key - ABG

External manufacturing and Artscape raise growth to 6% y-o-y
DTC grew 100% y-o-y in 2024, more to come
Share trading at 7x-6x '25e-'26e EBITA


DTC, external production and non-wallpaper fare better

The softer retail trend for wallpaper that was apparent in Q3 continued in Q4, with all core wallpaper brands delivering negative growth in Q4. Artscape received a large order from a major retailer for growth of 53% y-o-y in the quarter, while external manufacturing continued to fare well, contributing to y-o-y sales growth of 6% for the Group. The Artscape order came with slightly higher SG&A costs, but the net EBITA growth of 20% (to SEK 28m) for a margin of 13.8% suggests Embellence Group is on track to meet its 15% margin target. The board proposed a DPS of SEK 1.25 for 2024, corresponding to 50% of EPS vs. its financial target of 30%-50%. We forecast a 0.6x ND/EBITDA ratio post-payout in Q2'25e; as such, the balance sheet remains unburdened.

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