In Q1, newly acquired US-based Artscape Inc. has been consolidated for one month (from March 1), making its impact on the group’s financials in Q1 limited. More specifically, we expect the acquisition to add ~6% in sales growth for the quarter, resulting in group sales of SEK 184m (~-4% organic, ~1% FX, ~6% M&A). Looking further into the business areas, we retain our view that Europe and RoW should see the highest growth, with the lion’s share of the growth in RoW naturally stemming from Artscape. We particularly expect the sales growth to be driven by the premium segment, which has its largest share of sales in Europe and RoW. For the Nordics, however, we expect more muted growth, for a y-o-y sales deceleration of 9%, as it has the lowest share of premium sales among the business areas.
… and make insignificant estimate revisions
Since we initiated coverage on Embellence on March 11, nothing major has happened that should have a significant impact on our estimates. As such, we make insignificant revisions, with sales and adj. EBITA down by just 0.2-0.3% for ‘22-’24, due to FX. However, we note that consumer confidence has fallen to its lowest level since the first COVID-19 lockdown (in April 2020). While this could impact the demand for Embellence’s products ahead, we reiterate our belief that customers in the premium segment, which is the group’s core focus, seem less price sensitive than those in the value segment. We think this could make Embellence more resilient when purchasing power declines. In terms of margins, we expect a gross margin expansion of 1.8pp y-o-y to 55.5%, partially supported by price hikes to offset cost inflation, and an adj. EBITA margin of 15.9% (+0.1pp y-o-y), yielding Q1 adj. EBITA of SEK 29m (+4% y-o-y).
Fair value range unchanged at SEK 30-41 per share Lastly, on the back of our minor estimate revisions, we...
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