Q2 report on 23 July

Reported sales +10% and est. EBIT +3% on weak margin

Share +25% YTD, still trading at 20% below peers

Q2 expectations
We expect Swedol to have a weak second quarter due to the recent opening of four new stores and the acquisition of two stores in Finland. We estimate this to have impacted profitability, due to higher than previously expected costs. We expect EBIT to grow 3% y-o-y at SEK 95m, at a margin of 10.3% (11.0%). This comes on the back of already reported sales of SEK 923m, implying 10% sales growth (we estimate 3% organic, 7% from new stores and M&A, FX ~0%). The integration of Metaplan Oy and Karl S Hansson AS added SEK 41m in sales, or 5% of growth. For the period, we expect net income to increase by 4% to SEK 71m, indicating an EPS of SEK 0.85.

Forecast changes and outlook
We have adjusted our ‘19 sales estimates down by 1%, driven by the slightly weaker than expected second quarter. We expect that margins will be slightly weaker than previously thought and lower the ‘19e EBIT margin by 20bp to 10.6%. Beyond ’19 we are confident about continued profitable growth. The completion of the Swedish logistics centre in Örebro (summer 2020e), should significantly support margins end-2020 and throughout 2021, and we expect the EBIT margin to rise to 10.8%. After several new store openings in H1 19’, we expect to see further store expansion, but at a slower pace. We are confident in the omni-channel concept for Swedol, but its goal of SEK 5bn in sales in ’20 (ABGSCe SEK 3.9bn), calls for a substantial increase in acquisitions.

Trading well below peers, with higher profitability
The share is up 25% YTD, currently trading at ’19e EV/EBIT of 10.1x, which is 20% below the peer average. Despite slightly lower estimates, we note that Swedol has similar sales growth estimates to peers, significantly higher EBIT margins, and both the ability and plans for future M&A (not in estimates).

info@introduce.se (Introduce.se)

ABG Sundal Collier - Introduce.se