Avensia
Avensia - In it for the long run (ABG Sundal Collier)
2020-05-20 12:55
Solid 8% sales growth, but contracting margins vs. Q1’19
Continued high net recruitment rate will hurt ‘20e margins
10.4x ’21e EV/EBIT, ’19-‘22e sales CAGR of 15%
Sales +8% y-o-y, but EBIT down 33% y-o-yAvensia’s Q1 key numbers were pre-announced on 29 April. Sales were SEK 89m (0% vs. ABGSCe), +8% y-o-y, driven by a broad set of projects in the quarter. EBIT was SEK 8.2%, down 33% vs. Q1’19 and -22% below our forecast. The contracting margins y-o-y by -556bps was mainly explained by higher fixed costs (investment in a new office in the Philippines), together with tough comps as Q1’19 was a strong quarter (albeit it also included some positive non-recurring items).
Weak Q2-Q3 on the horizon, but long-term outlook remains
While Q1 was overall a solid quarter - both in terms of demand and utilisation - we see lower demand in the coming quarters amid COVID-19. Although we reiterate our belief that e-commerce is an appealing sector despite the pandemic, we think that some of Avensia’s customers will reduce their near term investment because their non-online business operations are likely to underperform in the current environment. Avensia can partly offset the lower demand by reducing its number of sub-consultants, but we nevertheless believe that the impact on sales and EBIT will be material. Therefore, we cut ‘20e EBIT by 41%. It should be noted that Avensia could have decided to implement short-term layoffs and reduced its overall headcount, in order to defend its margins further, but it has not. Instead, it is taking the opportunity to invest in personnel in 2020 and thus seeks to be well-prepared to bear fruit once the market demand returns to historical levels. We like the initiative and we forecast strong sales and earnings growth in 2021e. Even so, we wish to highlight that we see weaker quarters in the near term, particularly Q2-Q3’20e.
Currently trades 32% below peers on ‘21e EV/EBIT
Avensia’s share is trading at 10.4x ‘21e EV/EBIT on our revised estimates. This eq
...
- Läs mer på Introduce
Läsaren av innehållet kan anta att ABG Sundal Collier har erhållit eller kommer att erhålla betalning för utförandet av finansiella företagstjänster från bolaget. Ersättningen är på förhand avtalad och är inte beroende av innehållet.
info@introduce.se (Introduce.se)
ABG Sundal Collier - Introduce.se