Reinforced confidence in Fortnox’s LT growth story

We reduce ‘21e EBIT by 2%, but raise ‘22e EBIT by 7%

2025e sales of SEK 2.6bn, 31% ‘19-25e sales CAGR

Strong growth message
At last Friday’s CMD, Fortnox’s management team laid out its roadmap for sales growth over the next five years. The company’s stated goal of reaching 700,000 customers and an ARPC of SEK 300/month by 2025 (corresponding to a ‘19-25e sales CAGR of ~30%) strongly voices management’s confidence in the company’s ability to grow. This is particularly true given that the business plan features neither price hikes nor geographical expansion (although the latter was not ruled out). On the back of launching several new growth initiatives, including new product launches, enhanced partnerships and new services, Fortnox believes that it can improve its overall offering in such a fashion as to attract significantly more customers, users and usage of its products.

We expect sales growth to accelerate from H1’21e
We find the customer intake goal somewhat optimistic and forecast an end-‘25 customer base of 667,000. That said, we see good opportunities for Fortnox to beat the ARPC target, and forecast an ARPC of 345 in 2025 (vs. R12m ARPC of SEK 168). We see good contributions for each of Fortnox’s product areas, and see particularly high potential for its marketplace. We have not incorporated any M&A into our forecast, but see a high likelihood of acquisitions. All in all, the CMD reinforced our confidence that Fortnox still has many growth opportunities and that the current ARPC is far below its potential. In light of this, we raise our 2021-2022 sales forecast by 4-11%. On EBIT, we cut our 2021e EBIT by 2% due to higher costs, but raise the corresponding 2022e figure by 7% amid operational leverage.

21x ‘25e EV/EBIT coupled with a 3.3% FCF yield
On our new estimates, we see a 2021e EV/EBIT of 80x based on the current share price. However, given the rapid profit growth, this shrinks to 21x on our 2025 estimates.

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