Humble Group: A sweet start to the year - ABG

Q1 report in line with preliminary figures…
…with a strong performance across the board
Value range intact at SEK 24-43 per share

Q1’22 key takeaways
The Q1 report was in line with prelim. figures, with sales of SEK 879m, up from SEK 88m in Q1 2021. The organic growth of 25% continues to impress and is well-above its financial target of at least 15%. Also, adj. EBITA was SEK 93m, for a margin of 10.6% (+1.1pp vs ABGSCe & +4pp y-o-y). We note that Humble is growing both organic sales and its adj. EBITA margin, although Q1 is the group’s seasonally softest quarter, thus adding confidence during volatile market conditions. According to mgmt. the majority of its subsidiaries have continued to hike prices to offset cost inflation. This was reflected in a stronger than expected gross margin of 34.2% (+2.7pp vs ABGSCe & +1.2pp y-o-y). On a pro-forma level, group sales came in at SEK 1,067m and adj. EBITA at SEK 115m. Lastly, operating cash flow before changes in NWC was SEK 91m (-1m after changes in NWC). We note that the op. cash flow was negatively impacted by a large increase in inventory levels, which mgmt. said was a strategic decision in order for stock levels to meet demand.

Outlook: reassuring outlook on both M&A and margins
Since our preview, Humble has announced the acquisition of Franssons Konfektyrer AB, a Swedish candy manufacturer. With LTM sales of SEK 38m and EBITDA of 9m, we estimate that the acquisition will have a minor positive financial impact. Although cost inflation continues to pose a threat, Humble’s continuous work with efficiency improvements to protect its margins seems encouraging going forward. On the back of the above, we raise our ‘22e-‘24e sales by c. 1% and adj. EBITA by 1-3%. On our updated estimates we are now looking for a YE’22 ND/EBITDA of 4.4x incl. earn-outs and 3x excl. earn-outs.

Share trading at adj. EV/EBITA of 14x-8.5x in ‘22e-‘23e
Following our minor estimate revisions, we leave our value range unchanged at SEK 24-43 per share. ...
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