Q2 was slightly better than expected

We keep our estimates largely intact

19% 2019-2022e EBIT CAGR, 10x ‘21e EV/EBIT

Q2 seems to have been solid for the IT services companies
We have seen several better than expected Q2 reports lately from the IT services’ companies. Knowit posted a 50% EBITA beat vs. cons, while HiQ beat consensus’ EBIT by 42%. Avensia’s Q2 report was also a tad better than expected. Sales were SEK 76.5m (+1% vs. ABGSCe), up 4% y-o-y, while EBIT was SEK 0.1m (vs. ABGSCe SEK -0.4m) for a margin of 0.2%. It should be noted that Avensia did not obtain any governmental subsidies during Q2. Instead of going for the passive play, Avensia has kept its net recruitment rate high, with sequential headcount growth by 9 people (or 4%) which compares to our forecast of +5.

We think net recruitment will stay high at Avensia this year
It has both been hard and expensive to find talented people in an overheated IT consultants market, which has been the case in recent years. However, as COVID-19 has taken its toll on the market, finding competent employees is now much easier. For that reason, combined with the assessment that the demand for e-commerce consultancy services will intensify once the dust settles, we believe that Avensia will keep its net recruitment rate high throughout 2020. While we estimate that this offensive play will hurt 2020 EBIT margins, we see improved margins in 2021e and beyond.

10x ’21e EV/EBIT is 29% below peers
We keep our 2020-‘22e sales and EBIT forecasts largely intact on the back of the Q2 numbers. At the current share price, Avensia is trading at 10x ‘21e EV/EBIT and a P/E of 14x. This equates to 29% and 16% below other Nordic IT services peers.

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