’19 has seen several concrete initiatives to improve profits

We expect SEK 32m in cost savings until ’21e

Fair value range of SEK 25-90

Taking action to drive the margin expansion story
During ’19, DistIT has undergone many changes; most notable are the ongoing restructuring initiatives since Q1’19. So far, the cost is SEK 25m, but with SEK 47m in estimated cost savings to be realised no later than ’21. The restructuring has mainly concerned the integration of DistIT’s largest segments Deltaco and Aurora (together 83% of sales), which historically have been managed independently without any realised synergies. Minor changes have also been made to Septon (13% of ’18 sales). Furthermore, in September ’19 the realised sale of all shares in DistIT Fastigheter AB is estimated to provide a SEK 44m profit, a SEK 61 positive cash flow and a SEK 102m net debt reduction.

’20-’21e EBIT >180bp vs. ’19e, but moderate growth
To account for execution uncertainty we implement 70% of the communicated cost savings into our estimates, resulting in SEK 32m (SEK 2m ’19e, SEK 24m ’20e and SEK 6m ’21e). We estimate ’20e and ’21e EBIT margins of 4.7% and 4.9%, respectively. The sale of real estate shares in ’19 is estimated to support a 30% FCFy and a ND/EBITDA of 1.8x, providing ample room for M&A and distribution rights, necessary to support further high growth. Organically, we estimate the growth prospects around 3-4%.

Fair value range SEK 25-90: significant upside potential
Our fair value range is based on a three-scenario DCF analysis: 1) Margins trend down to historical levels and growth around 1%. 2) Reflects our view of and average EBIT margin of 5.3% and growth stable at ~3%. 3) EBIT margin trending towards 6.3% and top-line CAGR of 5% in ’21e-’30e. We arrive at a range of SEK 25-90, indicating an average of SEK 58. We conclude that if current initiatives progress as expected, there is upside potential to the current valuation. Still, we have not yet seen any proof of cost savings an
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