Svedbergs - Showing relative resilience - ABG

Q2 report due on 15 July We expect sales of SEK 444m and EBITA of 66m We lower our ’23-24e EBITA by 3-5% Slower market outlook After two years of strong home improvement markets, we are starting to see some signs of a pullback. For instance, Statistics Sweden shows a 16% decline in building starts in Q1’22, which could be reflected in Svedbergs’ P&L with a 12- to 18-month delay. Moreover, looking at the consumer business, the Swedish renovation index shows a steep decrease over the past three months. In the UK, however, the trend is more positive, with Statistics UK indicating March growth of 7% and 0% y-o-y for public and private new housing, respectively. We therefore expect the newly acquired UK business to deliver a solid Q2 result and estimate y-o-y sales growth of 8%. All in all, we forecast group sales of SEK 444m (+103% y-o-y, -1% org.) alongside EBITA of SEK 66m for a margin of 14.8% in Q2’22e. Estimate changes given market headwinds We expect volumes to hold up into H2 and forecast organic sales of 1% due to what is likely a continuously strong backlog from historical building starts. As such, with greater short-term momentum than our previous expectations coupled with FX effects, we raise our ‘22e sales and EBITA by 4% and 1%, respectively. Nonetheless, as we enter uncertain times of surging inflation alongside fewer house transactions and building starts, we are cautious on ’23-24e and leave our sales estimates relatively unchanged. This spills over to our margin assumptions, with volume and cost headwinds likely to pressure profitability. As such, we lower our ’23-24e EBITA by 3-5%. We also cut our ‘22-‘24e EBIT by 2-9%, which is partly due to the lower EBITA estimates and partly due to higher PPA amortisation assumptions from Roper Rhodes. Share is trading at EV/EBITA of 8.2-7.0x in ‘22e-‘24e Given our lowered estimates, the share is currently trading at EV/EBITA of 8.2-7.0x in ‘22e-‘24e; we reduce our fair value range to SEK 50-65 (52-68). Läs mer på ABG Sundal Collier