A lack of healthcare professionals is creating an underlying need for staffing companies, and Dedicare has managed to become one of the largest recruitment and staffing companies within the Nordic region. Sudden changes in supply or demand could further increase the need for staffing. For example, the COVID-19 pandemic boosted demand for contract staff and saw Dedicare grow adj. EBIT by over 73%, while sales grew organically by 37% in 2021. The strong figures have continued into 2022, with a 49% org. sales growth and a doubling of EBIT in Q1.
Geopolitics, pandemic support demand; H&P to boost sales
We estimate sales growth of 28% in 2022e, followed by -1% and 4% in ‘23e and ‘24e respectively. Moreover, we expect the group EBIT margin to go from 7.5% in ‘22 to 7.8% in ‘24, which is above the company’s target of 7%. The drivers for these estimates are: 1) near-term continuation of pandemic-driven demand ahead of a return to historical growth in the longer-term; 2) the H&P acquisition will be consolidated in Q2 and should boost Swedish growth and margins by adding 8% to sales in 2022e and 26% to 2022e EBIT; 3) Increased demand for social workers due to refugees from the war in Ukraine should lift sales growth and margins, especially in Sweden. Because of the above factors, we expect the company to deliver FCF sufficient for it to pay dividends and for it to make selected acquisitions.
Initiate with a fair value range of SEK 72-114 per share
We initiate coverage with a fair value range of SEK 72-114 per share, which corresponds to a 2022 EV/EBIT multiple of 5x-8x. The fair value range is a blend of the historically traded multiple for Dedicare, a DCF, peer valuations with staffing companies and companies with exposure to political risk. For more details about the valuation see p. 44. ...
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