Q2 marks yet another quarter in which Nilörn beats estimates. Order intake growth is now primarily driven by sports & outdoor clients, albeit somewhat offset by a slowdown by luxury clients. The gross margin of 44% was better than we expected (42.5%) due to improved sourcing. This quarter's order intake serves as strong evidence that Q3 should be when the sports & outdoor segment starts to rebound. That said, a full rebound effect is more likely to be seen in the Q4 numbers than the Q3 numbers.
EBIT estimates up 3-2%
We raise '24e-'26e sales by 2-1% and EBIT by 3-2% on the back of the report, which confirmed that sports & outdoor clients are recovering. Even though the luxury client segment is experiencing weakness, we do not expect significant order intake volatility in that segment compared to the pandemic-fuelled peak-to-trough in sports & outdoor. We have now been positively surprised by Nilörn's gross margin for a couple of quarters in a row. This would suggest that the company's sourcing capabilities can offset incremental price increases to a greater degree than we have thought. However, we do not yet extrapolate this into the numbers because of quarterly volatility. Finally, we continue to maintain our positive view of the company's long-term operating prospects, and expect Nilörn to return to an ROIC in the 25% range in the coming year.
Valuation
Our new estimates imply that Nilörn is trading at an NTM EV/EBIT of ~9x, which is ~5% below the 10-year average and ~35% below peers.
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