Coor delivered adj. EBITA of SEK 161m, in line with ABGSCe but 3% below FactSet consensus in Q2. Below the surface, growth was a bit disappointing in Sweden (-3% organic growth, 1% EBITA growth) and Denmark (-4% organic growth, -6% EBITA growth), offset by stronger than expected growth and profitability in Norway (11% organic growth, 42% EBITA growth). However, our assessment is that the strong performance in Norway was boosted by timing effects of variable volumes, which management said is expected to normalise in Q3. As such, we think it is fair to assume somewhat softer performance for Q3. In addition to this, management also guided for the effects of the cost savings programme to take longer than expected to realise, fuelling further downside to H2 expectations. That said, management still felt confident it will achieve the full effects, albeit a bit later (from late Q4).
Estimate changes
By extrapolating slightly softer development for Sweden and Denmark as well as a lower contribution from cost savings in H2'24, we cut 2024e adj. EBITA by 4% and '25e-'26e by 2%. We still expect Coor to deliver on its profitability target (5.5% EBITA margins) by 2026e, rendering an adj. EBITA CAGR of 7% '23-'26e.
Slightly softer Q3 on the cards, but improvements from Q4
While we expect Q3 to be a tad softer (-4% adj. EBITA y-o-y), we see better performance in Q4 (+2%) and 2025 (+14%), driven by better organic growth and margin improvements. We also expect FCF to improve from SEK 334m LTM to SEK 432m in 2025e. The share is trading at 10-8x EV/EBITA adj. (~20% below peers) on our updated '24e-'26e estimates (7-13% FCF yields).
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