• Q1 weaker than expected...
• ...but outlook remains bright
• Low valuation and leverage on market, lower interest rates

Slow start to the year

While the top-line held up in line with our expectations in Q1, adj. EBITA was 16% below our estimate at a margin of 5.5% (Q1'23 6.0%, ABGSCe 6.6%). This was disappointing, as we had expected the recent acquisitions to provide some cushion to a still-sluggish market. The Fashion segment was a significant drag, but weakness was widespread across geographies and a softer UK market affected Kammac negatively. As expected, overcapacity remained an issue. However, activity appears to have picked up meaningfully in March and April following a weak start to the year. Also, recall that comps will become easier from Q2 after a period of negative y-o-y effects due to contract closures and the normalisation in Air & Sea. On another positive note, Print & Packaging had a strong Q1, and we expect the trend to continue. Elanders also continued to impress with its ability to adjust to prevailing market conditions, resulting in another working capital release and an OPCF of SEK 641m, implying impressive cash conversion.

Lower estimates but earnings growth still strong from Q2e

We lower 2024e-2025e EBITA by 8-4%, driven by the weak Q1 and additional caution on upcoming quarters. Despite this cut, we continue to forecast strong earnings growth from Q2 onwards and see upside if Elanders proves successful in filling overcapacity. We also see margin upside relating to the acquisitions.

Attractive valuation and high-potential acquisitions

We continue to have confidence in Elanders' ability to navigate challenging markets, and we see value support at 12x 2024e adj. EBITA. The overcapacity, together with leverage on an improved market and lower interest rates, provides meaningful upside potential. Finally, we think the balance sheet remains in solid shape despite higher leverage, and see good leeway.