Embellence Group - DTC could counteract soft demand - ABG

Embellence reports Q1'23 on 27 April
Q1e net sales of SEK 176m, adj. EBITA of SEK 26m
Share trading at 6x-4x '23e-'25e EV/EBITA


Market still soft, strong brands to outperform

Sequentially, consumer sentiment is slightly better than in Q4 across markets, but key retail indicators point to continued soft growth for home improvement sales, with all-time-low willingness to make investments in homes on account of interest rates, inflation and energy pressures shrinking discretionary income. We expect upper premium/luxury brands, such as Cole & Son, to be less affected by the market downturn, so we forecast a slight organic net sales drop (Q1'23e: -5% org. y-o-y) with continued softer (-17% org. y-o-y) growth in the Boråstapeter-dominated Nordics. Q1'23e comps are easier in RoW, and our estimated 5% net sales decline is a 25pp q-o-q improvement. We estimate Q1'23 net sales of SEK 176m. Price adjustments at the start of the quarter supporting the gross margin and the full effects from the SEK 9m/y cost savings program from 1 Jan mean we forecast a q-o-q 2pp margin improvement for adj. EBITA of SEK 26m. Revisiting SG&A levels beyond the next quarter, we lower '23e-'25e EBITA by 2% in this note while making limited adjustments to net sales. The 1% higher '23e-'25e net sales estimates mainly reflects FX fluctuations.

Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/embellence-group/Equity-research/2023/3/embellence-group---dtc-could-counteract-soft-demand/