Q3 GM impacted by product mix & shipping costs

Inventory and pricing in place to deliver a strong Q4

36% EBIT CAGR ’20-’23e at ’22e adj. EV/EBIT of 12x

Q3: Sales in line, but lower gross margin
Sales were in line with our expectations, but margins were worse than expected. The gross margin decreased to 20.6% (ABGSCe 21.7%) from 21.1% last year, primarily due to rapidly increasing logistics costs and a less favourable product mix. Sales of the high-margin own brands (EMV) disappointed, growing by just 8% y-o-y (we expected 20%). Furthermore, the geographical expansion of EMV weighs on margins, as DistIT has to share the profits with the out-of-Nordics distributors when selling in its new markets. EBIT was SEK 7.3m, but was weighed down by a non-recurring cost of SEK 11.9m related to the acquisition of EFUEL. All in all, adj. EBIT came in 13% lower than we expected, but due to temporary factors that should subside.

DistIT has prepared all year to deliver a strong Q4’21
The fourth quarter is what makes the year for DistIT. Fortunately, it has been preparing since H1, building stock to minimise supply chain risks. As such, and with the strong inventory and major price increases in place, we expect it to be able to deliver a solid Q4’21, albeit a bit weaker that we previously expected. Despite being proactive, we expect logistics and input cost inflation to continue negatively affecting margins. However, the larger share of EMV sales should be supportive, offsetting some of the weakness to the gross margin, which we expect to be 23% in Q4’21e, down 60bp y-o-y. Hence, we lower adj. EBIT by 5.5% for Q4’21e. This, is combination with the worse-than-expected Q3 results, lowers FY’21e adj. EBIT by 6.0%.

EFUEL to fuel 14% organic sales CAGR ’20-’25e
On our estimates, the share is trading on EV/EBIT ’22e of 12x, ~12% above its 5Y historical average, but now with a higher growth rate than historically at 36% EBIT CAGR ’20-’23e. This is largely driven by EFUEL, which management expects to grow 70-100% per year while delivering a >
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