Q4 results due on 17 February

We expect sales of SEK 157m and adj. EBIT of SEK 6m

Share trading at EV/EBITA 13x-10x in ‘22e-‘23e

Q4 expectations
Careium reports its Q4 results on 17 February. We expect sales of SEK 157m, up 8% y-o-y (of which -3% organic) driven by M&A contributions, positive FX contributions and by some implementation of previously pending contracts that the window between the COVID-19 waves in Q4 enabled. Moreover, we expect that the Q4 results remain affected by supply chain constraints, mainly in terms of price increases. It is difficult for Careium to move price increases to the customer due to long-term agreements. Moreover, the latest wave of the pandemic has led to elevated sick leave, raising the staffing costs involved in maintaining a high standard in the alarm centres. As such, we expect a GM of 40%, which is slightly lower than the previous quarter. As this is Careium’s first quarter reporting as a standalone company, we expect adj. EBIT of SEK 6m, corresponding to an adj. EBIT margin of 4%, which is nearly half of the segment’s historical adj. EBIT margin due to central costs.

Slightly lower gross profit and EBIT
We leave our sales estimates largely intact, but cut our GM and EBIT margins by 5pp and 3pp for Q4’21e and Q1’22e, respectively due to increased component and staff costs. We expect the main focus for Careium in H1 will be securing synergies from its latest acquisitions of the Dutch Innocom and UK-based Helpline, rather than acquiring. When the acquisitions are fully implemented, we expect that to be visible in the margins. As such, we expect the EBIT margin to rise to 8% in H2’22e.

Share is trading at EV/EBITA 13x-10x in ’22e-‘23e
Careium’s share is down 12% since the spin-off and is currently trading at EV/EBITA of 13x-10x in ’22e-’23e. Our fair value range of SEK 31-44 corresponds to an EV/EBITA multiple of 12x-18x ‘23e. Assuming that Careium utilises its full M&A headroom (2.5x ND/EBITDA, acquired at 8x EV/EBITDA), we estimate th
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