Embellence Group: Lower volumes lead to COGS deleverage - ABG

Q2 report due 19 July
Q2'23e sales of SEK 195m, adj. EBITA of SEK 21m
Share trading at 7x-5x '23e-'25e EV/EBITA


Home improvement sales remain soft

With key indicators pointing south, we expect a soft outcome for Embellence in Q2'23, against slightly tougher comps. On the back of a sharp decline in the number of tax reduction applications and few house transactions in Sweden, we expect an organic decline of 9% for Nordics in Q2'23e. For Europe, we expect demand to have tapered off slightly following cost of living increases, but we pencil in organic growth of -4% in Europe as we expect the end consumer to be more resilient than in Nordics. Extrapolating the relatively strong US-driven development in RoW in Q1'23, we expect to see 1% organic growth for the segment in Q2'23e. All in all, we estimate Q2'23e net sales of SEK 195m, for y-o-y growth of 3% (-4% org.). We lower our H2'23e organic growth, anticipating slightly softer demand going forward, but FX tailwinds offset for 1-2% higher net sales in '23e-'25e.

Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/embellence-group/Equity-research/2023/6/embellence-group---lower-volumes-lead-to-cogs-deleverage/