Pricer - Enhanced outlook for a higher GM in H2 - ABG

Q1 came in better than expected on sales and ordersWe lower '23e-'25e EBIT by 12-6% on higher opex0.5x EV/sales and 11x EV/EBIT on '24eQ1 sales of SEK 571m, +7% vs. ABGSCePricer's recent quarters have been characterised by strong momentum in sales and orders, on the back of a strong market, but with gross margins (and profits) suffering from elevated component prices, increased freight costs, and FX. On sales and orders, Q1 continued on a similar note (y-o-y growth of +23% and +28%, respectively), but encouragingly, the gross margin of 15.8% saw a slight improvement from 15.5% in Q4. Although we believe that price pressure in the industry remains fierce, Pricer is now starting to benefit from improved external factors (i.e. lower component prices and freight costs). Together with Pricer announcing price hikes for some of its key accounts, this makes us more positive for further GM improvements ahead. Meanwhile, we expect sales momentum to remain strong amid the current inflationary environment and retailers' looking to digitalise themselves to cope with increased labour costs. EBIT of SEK -14m in Q1 fell from SEK -10m in Q1'22, hurt by the contracting gross margin and rising opex, with the latter coming in 5% above our forecast.Lower EBIT estimates on higher opexAlthough we lift our sales and gross margin assumptions slightly following the Q1 numbers, we cut '23e-'25e EBIT by 12-6% on higher opex.Good growth prospects in '23e-'25eThe current inflationary environment was a major tailwind for Pricer's 44% order growth in '22. Even if CPIs do slow down, we argue that the industry will benefit in the coming years from its recent progress. Meanwhile, the global penetration rate of ESLs remains low (<10%), while Pricer should gain from the further deployment of four-colour ESL tags, so we estimate that Pricer will report a '21-'25e sales CAGR of 33%. On the back of operational leverage, we also expect EBIT margins to gradually improve.Läs mer på ABG Sundal Collier