We expect sales of SEK 1,845m for Q1'24, implying 10% organic y-o-y growth in addition to a 1% FX tailwind. We anticipate a gross margin of just under 30% given the company's history of being able to maintain the 30% level despite cost inflation and elevated freight costs. Our updated EBITA estimate is SEK 143m, which corresponds to an EBITA margin of 7.7%.
Estimate changes
We raise '24e-'26e sales by 1% on FX alone. As we trim our gross margin estimates and slightly raise opex, which we believe is necessary to increase capacity in '25e, we cut EBITA by 4-2% for '24e-'26e. Given that the Red Sea tensions are still ongoing, we argue that the gross margin recovery is now increasingly dependent on the company improving the product mix rather than benefiting from materially lower freight rates (vs. '21 levels). With the sale & leaseback being complete (and now included in our estimates), Humble has now come a long way in decreasing its leverage, and we believe that this should open up for capital allocation opportunities starting H2'24 at the earliest.
Valuation
Based on our revised estimates, the company is trading at an 8-10% '24e-'25e lease adj. FCFE yield (excl. earn-out payments), while peers are trading at an avg. of 8% and growing earnings at a generally slower rate.
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