DistIT: Turning the page - ABG

We cut '24e-'25e adj. EBIT by 63-36%EBIT recovery delayed into 2024'24e-'25e EV/EBIT 30x-10xTough but solvable operating conditionsSince DistIT obtained consent for amended terms and conditions for the outstanding bond, there is more operating freedom for the company. With an ongoing turnaround of EFUEL and a rebound for Aurdel, contingent on improved consumer sentiment, the amended terms and conditions are a helpful step towards DistIT's comeback. The sales and adj. EBITDA guidance of SEK 2.3-2.5bn and SEK 40-80m, respectively, mean that '24e is mostly expected to be a repeat of '23e, albeit with a slimmer cost structure. While growth is near-zero, we think that the recent right-sizing of the company's cost base should prove beneficial in the coming years.Estimate changesWe cut '23e-'25e sales by 10-8% following the Q3 report and guidance. We also cut '24e-'25e adj. EBIT by 63-36%. For '24e, we assess that the company should be able to achieve an adj. EBITDA in the lower end of the guided range of SEK 40-80m, more specifically SEK 52m. We have not changed our view on Sominis' nor Septon's operations, but have assumed tougher conditions for Aurdel in the coming years. Recent FX tailwinds (i.e., a weakening of the USD and EUR vs. the SEK) could, however, aid DistIT in its recovery during '24, and a better product mix could yield a better gross margin. Overall, we deem the recent actions necessary and positive for the company's operating prospects.ValuationFollowing our estimate revisions, DistIT is trading at 30-10x '24e-'25e EV/EBIT. While '24e EV/EBIT is above the historical average, the multiple decreases rather rapidly as we assume that the company will return to a normalised profitability level.