With over 100 years of history, Embellence Group has ramped up its growth over the last ten years to become a house of brands. With sales in the Nordics (~50% of group sales in ’21), Europe (~40%) and RoW (~10%), Embellence, through its six brands, has a global distribution network that is present in >90 countries across all continents. Its core offering is premium wallpaper, but the group is successively expanding into adjacent product categories (e.g., textiles, window film, and floor coverings). Operating in a highly fragmented market and with a lean balance sheet (YE’22e ND/EBITDA 1.5x), we see significant possibilities for Embellence to become a consolidator within the premium home interior market.
Premium segment driving growth
Embellence targets ’25 sales of SEK 1.2bn, implying a ’21-’25 CAGR of 17%. With an above-group gross margin and higher forecasted growth rates, we view the premium segment as the core growth driver. Moreover, we define its key organic growth pillars as: 1) geographical expansion in Europe and the US through its premium brands Artscape, Cole & Son and Wall & Decò, 2) expanding further into adjacent categories, and 3) improving its B2C channels. We forecast a ’21-’25e sales CAGR of 8% (3% organic). Furthermore, we estimate a stable gross margin, coupled with operational leverage, to yield a ’25e adj. EBITA margin of 17.5% and a ’21-’25e adj. EBITA CAGR of 11%.
Fair value range implies ’23e EV/EBITA adj. of 6.1x-7.8x
The Embellence share is -7% YTD, and -26% since it was listed on the Nasdaq First North Premier Growth Market in March 2021. As such, earnings multiples (EV/EBITA, NTM) have contracted by 16%, and the share is on our estimates currently trading at 7.3x-4.8x in ’22e-’25e. Blending our peer group valuation, EV/EBIT(A), with discounted cash flows
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