Pricer: Pressured gross margin remains a headache - ABG

Q2 due Thursday 21 July, 08:30 CET We expect strong orders and sales but weak EBIT 35x-13x ‘22e-‘23e EV/EBIT Demand for ESL solutions remains strong
For Q2, we expect Pricer to present another set of solid numbers in terms of sales and order intake, but with weak gross margins amid elevated freight rates, unfavourable FX movements and elevated input prices. ESL solutions supplier E-Ink says that it is seeing rapidly growing demand for ESLs from hypermarkets in Europe, as retailers are pushing digitalisation due to rising labour costs and labour shortages. This statement favours Pricer. We forecast Q1 orders of SEK 590m (+45% y-o-y), sales of SEK 472m, (+21% y-o-y) and EBIT of SEK 0m (vs. SEK 23m in Q2’21). Pricer has announced a SEK 90m order in Q2 (vs. SEK 79m in Q2’21) from Dutch supermarket chain PLUS retail. This was the second order received from this customer this year, and we note a similar value/store in each order. In terms of gross margins, we expect a metric of 17%, which is largely in line with Q1 at 18%. As we expect the supply chain issues to improve in H2 while we also note that freight rates have recently declined, we expect Pricer’s gross margin to improve slightly in H2’22.

We lift our sales forecasts on the enhanced growth outlook On 8 June, Pricer held a CMD where the main message, in our view, was that the company sees strong growth prospects ahead. To reflect this positive outlook, we lift ’23e-‘24e sales by 5-10%. In terms of EBIT, however, we make negative revisions (8-11% cuts on ’23e-‘24e) due to lower gross margin assumptions, as we have taken a more cautious view on long-term gross margins on hardware. For 2022e, we make small changes to our sales forecasts but cut EBIT by 16% on lower gross margins.

We expect EBIT to return to growth in 2023e Pricer’s share is trading at 35x-13x ’22e-‘23e EV/EBIT. We expect profits to improve considerably in 2023e on the back of rapid sales growth, together with a slightly improved gross margin.

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