Embellence Group: Manufacturing can't outweigh soft retail - ABG

Net sales SEK 170m, -9% vs ABGSCe, -10% vs Factset cons.
Adj. EBITA SEK 26m, -6% vs ABGSCe, -7% vs cons.
Share trading at 7x-6x '24e-'25e EV/EBITA


Q3 in brief: retail downturn

The report is slightly softer vs consensus estimates in general. Net sales of SEK 170m is -7% y-o-y (-6% org.), and is -9% vs ABGSCe and -10% vs Factset cons. Embellence highlights a soft retail trend that can not be offset by other channels (decorators and D2C). By brand, Boråstapeter's sales grew by -7% y-o-y, Cole & Son by -18%, Wall & Decó by -12%, Artscape by -16%, Pappelina by -11% and External manufacturing sales grew by 98%: the strong momentum in external sales thus continues. Gross margins were 60.6%, 290bp higher y-o-y, significantly better than ABGSCe. This is likely an effect of higher capacity utilisation in external manufacturing. With a 2pp higher SG&A ratio from sales deleveraging, the gross margin uplift did not fully drop through to the EBITA margin which was +80bp y-o-y. The resulting EBITA of SEK 26m (margin of 15.3%) was -6% vs ABGSCe and -6% vs Factset cons. FCF was SEK 12m vs ABGSCe SEK 15m and Q3'23 SEK 7m.

Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/embellence-group/Equity-research/2024/10/embellence-group---manufacturing-cant-outweigh-soft-retail/