Embracer: No reason to be worried

Embracer delivered a solid Q2 with sales of SEK 3,296m, +5% vs. ABGSCe and +5% vs. Infront cons, and adj. EBIT of SEK 973m, +0.5% vs. ABGSCe and -0.4% vs. Infront cons. At the centre of attention, however, was not the numbers but the announced delays of two AAA titles, one being Saints Row 5, now scheduled for release on 26 Aug. The delay does not come as a surprise due to the complexity of the project. To us, it is more important that the game is received well and not which quarter it gets released, especially since the company announced it has 25 AAA games in its pipeline, with 11 currently under full development. The expectations on these will likely be coloured by the Saints Row release (read more about the delay in our in-depth analysis on page 5 in this report). It should be noted, however, that delays like these can bring a lot of uncertainty. But our prediction is that the game has been delayed to ensure that it meets the players’ expectations, which shouldn’t be that worrisome. Moreover, this quarter highlighted the strength of the underlying backlog. In a quarter with few releases, no game accounted for more than 10% of sales, and the top 40 games only made up 64%.

The share now trades at 10.9x ‘22/23e EV/EBIT adj. (-19% vs. large gaming peers). With the new guidance and transparency regarding AAA games in the pipeline, our assessment is that the visibility for the business for the next couple of years has improved significantly.

Embracer: No reason to be worried - ABG

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Embracer: No reason to be worried - ABG

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