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Avensia: Strong market to continue in 2022 - ABG

Strong report, largely in line with our expectations…
…but we cut ’22e-’23e EBIT by 5% due to higher costs
’21-’24e sales CAGR of 18%, 15.6x ’22e EV/EBIT

Sales growth of 31% y-o-y, -1% vs. ABGSCe
Avensia continued its strong momentum in Q4, growing sales by 31% y-o-y to SEK 114m. This was in line with our forecast at SEK 115m and was driven by high utilisation in a strong market: Avensia launched several new projects in the quarter. The sales growth also trickled down to a strong adj. EBIT margin of 9.7% (ABGSCe 8.3%), up from 4.3% in Q4’20. Headcount grew by 2% q-o-q to 319 employees at the end of Q4 (ABGSCe 323). Although personnel costs came in slightly below our forecast, other external costs were higher, partly stemming from the launches of new offices (Avensia has recently increased its focus on having smaller offices to improve its net recruitment rates, which we see as positive). The BoD has proposed total dividends of SEK 0.65/share (SEK 0.40/share ordinary and SEK 0.25/share extra), corresponding to a 3.7% div. yield at the current share price.

We expect prices and salaries to increase by ~5% in 2022e
Although we trim our ’22-’23 sales estimates by 2-1% due to a slightly lower net recruitment in Q4 than we expected, we continue to expect rapid growth in ’22e (20% y-o-y), driven by the strong market. We expect prices to increase by ~5% and note that Radar forecasts the Swedish IT services market to grow by 6% in 2022. In terms of salary inflation, we expect rates of ~5% in 2022. While the latter was already reflected in our forecast, we hike our estimates for other external costs following the Q4 report, resulting in a 5% cut on ’22e-’23e EBIT.

We expect Avensia to outgrow peers in ’22e-’23e
On our new estimates, Avensia is trading at 15.6x ’22e EV/EBIT, c. 10% above its 3-year historical average and in line with peers at 15.5x. That said, we expect Avensia to outgrow its peers in 2022e (20% vs. 11%) and 2023e (18% vs. 6%). We would also like to highlight the easy ... Läs mer på Introduce
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