Q1’21 EBITA SEK 96m, +9.1% vs. ABG, -2.9% vs. cons.

Continued margin tailwinds drive estimate changes

EV/EBITA 38-34x ‘21e-‘23e, excl. future M&A

Q1 recurring sales of SEK 314m, +23.8% y-o-y, ~7% organic
Vitec reported net sales for Q1’21 of SEK 373m, +0.5% vs. ABGSCe and +2.0% vs. consensus, where approximately 83.9% of the revenues were recurring, -3.1pp vs. ABGSCe. The recurring revenues grew by 23.8% y-oy, of which 7% organically. At group level this corresponds to total y-o-y growth of 20.8%. Service and licence revenues normalised compared to the elevated levels in Q4’20, which we expected given that Vitec’s recent acquisitions have had additional time to align their business models. Group EBITA amounted to SEK 96m, +9.1% vs. ABGSCe and -2.9% vs. consensus, for a margin of 25.8%, driven both by the stronger top line but also by temporary positive COVID-19 effects that boosted the EBITA margin by ~1%. Ultimately, Vitec reported an EPS after dilution of SEK 1.20, +82.4% y-o-y and +12.2% vs. ABGSCe.

We raise ’21e-’23e EBITA by 3.6-2.5%
We raise our EBITA estimates for ’21-’23 by 3.6-2.5% on the back of the Q1’21 report and since COVID-19 is still creating temporary margin tailwinds due to less business travel, etc. So far in 2021 Vitec has already acquired ~SEK 160m (~10%) in revenues, and given its cash position of SEK 280m, overdraft facilities of SEK 125m, and SEK 515m in the unutilised portions of its credit facility, we believe that Vitec will keep up the high M&A pace throughout 2021.

Valuation now ~35% above peer group median
In terms of valuation, Vitec is trading at a ‘21e-‘23e EV/EBITA of 38-34x, based on the current share price and our updated estimates, but excluding any future M&A. This is approximately 35% above the median of our peer group, which consists of relevant roll-up peers. Given the recurring nature of Vitec’s revenues, its above-peer margins and strong capital allocation track record, we would argue that this could be justified.

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