Q1’20/21e: Sales SEK 1,648m, adj. EBIT SEK 431m

Current FY adj. EBIT up 9.7% on strong new game sales

SOTP fair value of SEK 104-141 (93-125) per share

Estimates up on strong contribution from Games segment
Our research suggests that Embracer will enjoy both strong sales from its new releases and back catalogue in Q1’20/21e. We therefore raise our contribution from the Games segment by ~10%, from SEK 1,135m to SEK 1,248m, and it now comprises 75.7% of net sales in Q1e, the highest since the Koch Media acquisition in ’18. Ultimately, this leads to Q1e sales of SEK 1,648m, a gross margin of 56.3%, EBITDA of SEK 659m and adj. EBIT of SEK 431m.

Q1’20/21e revisions: Deep Silver, Coffee Stain, Saber
Following our end of quarter game sales update, we have adjusted our contribution from the Games segment in Q1’20/21e. We keep our top-line estimate for THQ Nordic at SEK 350m, as Desperados III has performed slightly below our estimates and SpongeBob Rehydrated will only contribute for one week. However, we increase our Q1 estimates for Deep Silver from SEK 450m to SEK 515m, on the back of a stronger than expected performance by Saints Row the Third Remastered and continued solid back catalogue sales from Metro Exodus. For Coffee Stain, we increase our revenue estimate from SEK 85m to SEK 108m, as Satisfactory on Steam has performed well above our estimates, further fuelled by a strong launch for Deep Rock Galactic. We also increase our estimates for Saber Interactive from SEK 250m to SEK 275m, as World War Z GOTY Edition performed above our expectations. We keep our SEK 400m estimate for Partner Publishing intact.

EV/adj. EBIT of 25.2x-16.1x, SOTP of SEK 104-141 per share
We have updated our three SOTP valuations, based on our current FY EBITDA estimates, which now suggest a fair value range of SEK 104-141 per share when we apply a range of relevant peer multiples. The increase is due to 1) our increased current FY EBITDA estimates and 2) because we think that player engagement w
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