Humble Group: Positioned in the sweet spot - ABG

Keeps steady acquisition pace Well positioned for a tougher market Currently trading at 10-8x EV/EBITA ’23e-‘24e

Key takes from the Q2 report The Q2 report was a slight miss on the top line, with SEK 981m vs our 1,020m but the organic pro forma growth of 23% impressed. A strong gross margin of 35.1% (160bp vs. ABGSC est.) was driven by favourable product mix that facilitates pricing power in the current environment. Adj. EBITA of SEK 82m was a slight miss vs. our estimates. Importantly, though, Humble is growing well above its financial target on a pro forma basis, reaching sales of SEK 1.5bn and adj. EBITDA of SEK 117m, implying that 37% of the sales target and 34% of the adj. EBITDA target were fulfilled on a LTM basis. There appears to be no scarcity of acquisition targets, with two confirmed acquisitions to date during Q3’22.

Outlook: strong growth, margin expansion Waning consumer sentiment in general suggests that H2’22 may be challenging. However, we believe that Humble is positioned in the sweet spot of current consumer trends with a material exposure to discount retailers. Additionally, price adjustments were implemented at the beginning of Q3’22, offsetting a fair share of the current COGS inflation. Due to the swift organic growth pace and additional M&A, we expect working capital to grow further. Furthermore, we stress that Q4’22 is a seasonally strong quarter for the group. As such, we forecast higher inventory levels in Q3’22e but a slight release after the Christmas trading. From Q3 onwards, three large acquisitions will be consolidated, of which the Privab companies are expected to add ~SEK 820m to FY sales whereas we calculate a dilutive effect of ~70bp on the EBITDA margin for ’23e-‘24e. Lastly, we forecast a net debt of SEK 2.7bn (5.2x EBITDA) at the end of FY’22e.

Trading at 10-8x EV/EBITA ’23e-‘24e As we add the abovementioned acquisitions to our estimates, we raise our ‘23e-‘24e adj. EBITA by 12-10%. Humble is currently trading at a corresponding ‘23e- ... Läs mer på ABG Sundal Collier

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