Doro: Returns to its core business - ABG

Doro trading ex-Careium as of 6 December We expect Doro to be stronger as a standalone company We find a fair value range for Doro of SEK 24-38 Share price dropped 50% on first day of standalone trading On 6 December, Doro saw its first day of trading excluding Careium (its previous Care segment), which resulted in a 50% drop on its first day as a standalone company. Since then, the share price has dropped another 14% to SEK 27. Even though Doro is presently in a declining trend, we believe its position – with little competition – is set to generate strong margins and cash flows. We have reviewed the valuation of the new Doro as a standalone company and find a value not far from the historical 8x NTM EV/EBIT. Raise core sales, lower EBIT margin to 9.0-9.5% in ’21e-’23e We have now excluded the spun-off Care segment from our estimates. We have also reviewed the market outlook, and given Doro’s 100% focus on its core business, we believe the company will be able to maintain sales at a CAGR of -4% for ’21e-’23e (previously -9.6%). We keep the gross margin relatively unchanged at 35-34% in ’21e-’23e. Since costs previously shared with the Care segment will be added to the company, the EBIT margins we have seen until now will be difficult to maintain. We estimate an EBIT margin of 9.0-9.5% in ’21e-’23e (previously 11.5-11.0%). Fair value range for new Doro of SEK 24-38 We have used a peer group of hardware companies selling their own brands in combination with a DCF. These valuation methods result in a fair value range of SEK 24-38 per share, which implies a multiple of 6x-10x ‘22e EV/EBIT. Based on our estimates, the share is currently trading at an EV/EBIT of 6x for ‘22e-‘23e.