Relais Group: Profit improvement expected for Q3 – we are in line with consensus - Nordea

Ahead of Relais Q3, due on 2 November, we maintain our estimates intact. We model Q3E sales up 9% y/y, driven by acquisitions and a slightly positive organic growth. Despite a more challenging macro environment and FX headwinds, we expect positive y/y margin development in Q3E and model adjusted EBITA of EUR 9.1m with margin up 70bp y/y to 13.0%. For Q3E, we are in line with Refinitiv consensus on sales and 1% ahead on adjusted EBITA.

Biggest uncertainties in Q3 relate to lighting sales, we believe. Low consumer confidence has likely continued to burden especially higher-margin own channel online sales. Repair and maintenance business has likely continued to benefit from solid demand despite slightly lower heavy traffic mileage in Finland in Q3 (down some 5% y/y on comparable basis).

Relais has managed its inventories well during past 12-months and based to our understanding, there are no major destocking risks in the market for Relais. However, cautiousness among customers likely continues with higher interest rates and possible demand volatility. Going forward, in addition to B2C lighting sales, equipment sales could see some headwinds from lower new commercial vehicle sales and tighter cost control among fleet operators. M&A likely remains on the agenda, while we do not expect any additional acquisitions during Q4 due to elevated leverage.

Overall, we believe Relais is well positioned against weaker economic conditions as it mainly focuses on 4-10 year old vehicles. In addition, we believe Relais could continue to gain more customers to its repair and maintenance businesses. Fleet operators are likely to favor lower price point independent repair and maintenance operators over OEM’s in order to manage their cost base. We have a fair value range of EUR 16.1-19.7 per Relais share.

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