EBIT margin rebound in Q2

Positive revisions from increased margin assumption

Share trading at a P/E of 11.9x for ‘22e

Q2e: Sales up 17% y-o-y, EBIT margin 11.3%
SJR preannounced on 12 July that the result for Q2 exceeded the market’s expectations. With the full Q2 report due next month, sales are expected to be SEK 104.6m (89.3m) with an EBIT of SEK 11.8m (1.7m). That is 3% and 70% ahead of our previous forecast where especially the EBIT margin of 11.3% vs. our assumption of 6.8% stands out. Since the EBIT deviation is substantially larger than the sales deviation, we think the recruiting business has been performing well in the quarter because it has a higher drop-through to EBIT. No further information was given and the Q2 report is due on 20 August at 08:30 CET.

EBIT margin target of 10% is looking reachable again
On the back of this new information, we adjust our forecast for Q2 but also extrapolate the margin improvement for the rest of ’21e and for ’22e-‘23e. Our revised forecast assumes an EBIT margin of 8.8% for ‘21e, up from 7.1% previously. For ‘23e, we forecast an EBIT margin of 10.2% now vs. 9.3% before. SJR targets an EBIT margin of 10% which we think is increasingly possible to reach given that the recruiting side of the business should return to historical levels. For example, in ’16-’17 SJR exceeded its EBIT margin target both years. Our EBIT margin revisions in conjunction with sales estimate increases of 2%-1% for ‘21e-‘23e result in EBIT increases of 25%-11% for ‘21e-‘23e.

’22e EV/EBIT of 8.1x with expected dividend yield of 5.5%
The share is now trading at a P/E of 11.9x on ‘22e and EV/EBIT of 8.1x on our revised forecasts. We also expect a dividend yield of 5.5% for ‘22e with a net cash position of SEK 38.2m at the end of ’21e.

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