We see robust momentum in the market, with IT consultants (e.g. Knowit and Exsitec) having shown strong growth in the quarter alongside record high sales growth at Litium’s customers, where Secondhand.se reached a new sales record and Didrikson’s online sales tripled in the quarter. Therefore, we expect a solid quarter for Litium with an ARR of SEK 63m, corresponding to 23% y-o-y growth and net sales of SEK 19m, corresponding to 29% y-o-y growth, due to growth in the number of customers and sales volumes on the platform. Growing customer sales volumes will grow in importance over time with the new Litium Commerce Cloud, which includes both a new platform and a volume-based pricing model. We do not expect to see effects from this in the figures yet, as most customers still use the old platform, but it will grow in importance over time.
We cut EBITDA by 65% in ‘22e, 42% in ‘23e
In light of management’s priority of continued high growth over near-term profitability, and a recent change of analysts, we have revised our estimates and delayed our expectation of profitability. We previously expected positive EBIT in ‘22e, but now expect it in ‘23e at the earliest. This translates into a 65% and a 42% cut to ‘22e-‘23e EBITDA, respectively. We emphasise, however, that we maintain our positive view on the company’s long-term prospects.
Fair value SEK 19-45 per share, EV/ARR 3.1x-2.4x in ’22e-‘23e
We keep the fair value range at SEK 19-45 per share. At the current share price, Litium is trading at an average EV/ARR of 3.1x-2.4x for ‘22e-‘23e.
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