Decreasing sales and profits in slow Q1

No slam dunk in Q2e, eyes set beyond that

EV/EBIT of 9.8x on our revised estimates

Investments are still blunting earnings
Hifab delivered sales of SEK 92m, a y-o-y decrease of 17% and 13% below our estimates. The company experienced higher absence among its consultants and has lowered the headcount somewhat, having a negative impact on growth and profitability. In addition, we believe that performance in the beginning of the year has suffered from customers being apprehensive in investment decisions. EBIT amounted to SEK 2.8m, with a margin of 3.1%, down 60bp y-o-y. Additional costs for the implementation of its new IT functions continued in Q1, and preparatory investments to launch its new regional segment burdened earnings. Hence, management’s focus is still on improving its operational platform in order to ensure sustainable and profitable growth.

Growth to bounce back, starting in H2’19e
Hifab hired as many new consultants so far this year as it normally does in a full year, with many of them having a higher degree of experience. Combined with a lower personnel turnover, this gives us more confidence in Hifab returning to a growth trajectory, mostly expected from H2’19 and onwards. For the short term, we still expect performance in Q2 to be clouded by the current larger cost base, and a negative Easter effect, coupled with more public holidays and long weekends (unofficial holidays). Overall, our revisions stem mainly from lowering our expectations on growth and profits in Q2, while raising our assumptions slightly for H2’19. In all, EBIT is revised down by -17% for 2019e.

EV/EBIT 9.8x is above average, but below peers
The share has experienced a solid appreciation YTD of 16%. On our revised estimates, and at the current share price, it now trades at an EV/EBIT of 9.8x and EV/Sales of 0.4x for ‘19e. It hence trades 17% and 37% below its key peers, respectively.

info@introduce.se (Introduce.se)

ABG Sundal Collier - Introduce.se