Swedencare: Lower estimates and higher valuation premium - ABG

Cut to Q2e on lagged price increases and softer demand We cut ’22e-’24e EBITA by 6-5%, on tougher environment Trading at a premium of ~40% to peers, ~65% to Vimian Price increases implemented later than indicated We think that the Q2 report will be on the soft side, without a sequential margin expansion. Price adjustments (mainly on Amazon) do not seem to have been implemented as planned, with a large share of the indicated April hikes implemented in May instead. At the same time, we expect cost increases to have been passed through. This holds back the sequential margin expansion that we previously had in our numbers. Our estimates imply a deterioration in underlying margins as the full quarter contributions from the acquired Innovet and NaturVet should be margin accretive by ~1pp. Although animal health and Swedencare should see resilient demand, our industry checks indicate trade downs and less expansion in dermatology products. Comps remain challenging, as in Q1’22, due to the abnormally high activity witnessed last year in veterinary clinics. We expect that clinic visits are down by low single-digits y-o-y, but that price hikes should offset the volume decline. We expect organic growth of 7% in Q2’22e.

EBITA estimates down 6-5%, but there is hope for H2e We are not overly concerned about demand deterioration; animal health has proven resilient. However, we cut our volume estimates and raise our cost assumptions throughout the period on the relatively more challenging environment. This results in 6-5% cuts to adj. EBITA for ’22e-’24e. We still expect an improvement in H2’22e due to: 1) scale in the legacy business, 2) volume ramp-up in Vetio from H2, 3) the addition of the high-margin acquisitions Naturvet and Innovet, and 4) price hikes compensating for the margin drop. This is all against easier comps that should put adj. EBITA growth at ~200% in H2’22e (H2 has 84% sales growth from M&A).

Trading at a historically high 65% premium vs. Vimian After cutting our estimat ... Läs mer på ABG Sundal Collier

Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/Swedencare/Equity-research/2022/7/swedencare---lower-estimates-and-higher-valuation-premium/