eWork: An overall strong Q1 - ABG

Sales +24% y-o-y, +5% vs. ABGSCe
We lift ‘22e-‘23e EBIT by 12-13%
13x-12x ’22e-‘23e EV/EBIT, ~25% discount to peers

Strong Q1 results across the board
With 24% sales growth y-o-y, eWork’s Q1 results were strong, driven by a robust performance on a continued strong IT services market. We note that most of its peers have also issued strong Q1 reports, with Knowit posting 10% (PF) organic growth y-o-y, Softronic 11% y-o-y, and CAG 12% y-o-y. eWork’s Q1 sales of SEK 3,924m were 5% ahead of our forecast, with all regions contributing well. Here, Norway remains on its strong trajectory (34% y-o-y), while Finland performed slightly on the soft side with 6% growth y-o-y. The gross margin of 3.69% (ABGSCe 3.69%) was flat q-o-q, but up 3bp y-o-y. Although opex was in line, the stronger gross profit than expected led to adj. EBIT of SEK 47m (+53% y-o-y), which was 23% above ABGSCe of SEK 38m.

Estimates raised
We lift ’22e-‘23e sales by 5% and continue to expect eWork to grow rapidly in 2022, up 18% y-o-y, with tailwinds from a very strong IT services market. Here, we note that IDC expects the Swedish market to grow by 7.1% in 2022 (vs. 5.5% in 2021) and 4.0% in 2023. Meanwhile, Radar forecasts 1.6% growth for Sweden’s total IT budget (recently cut from 2.6%). As such, we expect eWork to outgrow the market significantly. Given the company’s scalable business model, our upgraded sales forecasts lift ‘22e-‘23e EBIT by 12-13%.

’21-‘24e sales & adj. EBIT CAGRs of 11% & 14%, resp.
We now forecast eWork to deliver a ’21-‘24e CAGRs in sales and adj. EBIT of 11% and 14%, respectively. The share is trading at 13x ‘22e EV/EBIT which is in line with its historical 4-year average but is 27% lower than Nordic IT services peers.
Läs mer på ABG Sundal Collier

Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/ework/Equity-research/2022/5/ework---an-overall-strong-q1/