Embellence Group: Market softness finally sets in - ABG

• Net sales -13% vs. ABGSCe, adj. EBITA -13% vs ABGSCe
• We lower '23e-'25e adj. EBITA by 9-10%
• Share trading at 7x-5x '23e-'25e EV/EBITA vs historical 6x-9x

Q2 report in brief
Q2 saw a sequential deceleration in Nordics and RoW. Nordics declined by 19% and RoW by 11%, which despite a smaller 1% decline in Europe led to an 11% lower top-line for the group y-o-y for net sales of SEK 170m. Gross margins were at an all-time-high 61.4%, +4.2 pp sequentially, driven by a higher share of premium sales and price increases primarily. Lower operational leverage hurt operational margins to some degree, however, with adj. EBITA of SEK 18m (-13% vs ABGSCe) corresponding to -25% y-o-y growth and an ~11% margin. Notably, Embellence is still producing double-digit margins despite the materially lower net sales. Imminent product launches drove inventories higher by SEK 16m sequentially for FCF of SEK 10m.

Länk till analysen i sin helhet: https://cr.abgsc.com/contentassets/427d0d1473b6431fb00c5b5af535e9c8/pdf/market-softness-finally-sets-in.pdf