’21-‘24e sales CAGR of 22%
ESL market looks strong
With tailwinds from retailers looking set to mitigate increasing labour costs, handle the current inflationary environment and improve the customer experience, the ESL market has recently been strong. We expect these trends to continue in Q3, and find further confidence in our assessment of a growing market in the coming years on the back of ESL supplier E Ink’s recent production capacity expansion announcement (with the supplier also saying that it expects the ESL penetration rate to surpass 10% this year vs. ~5% in the past years). We forecast Q3 orders of SEK 506m (+65% y-o-y), sales of SEK 567m (+14% y-o-y) and EBIT of SEK 1m (vs. SEK 40m in Q3’21). As in previous quarters, we expect gross margins to continue to suffer from elevated freight costs (although freight rates have lately declined) and expect 16% in Q3, down from 22% in Q3’21 but relatively flat vs. Q2 at 17%. Furthermore, Pricer recently announced a ~SEK 300m framework agreement with a European retailer. Although we do not expect the signing to contribute materially to Q3 orders, we argue that the news supports our ’23-’24 forecasts.
We take down ‘23e-‘24e EBIT by 5% on lower GMs
While we trim ‘22e sales by 2% on slightly more conservative growth assumptions, we keep our ‘23e-’24e sales largely intact. In terms of EBIT, we make small revisions for ‘22e, but cut ’23e-‘24e by 5% on trimmed gross margins, as we think that the competitive landscape will remain stiff.
21x-13x ’23e-‘24e EV/EBIT
On our revised estimates, the share is currently trading at 21x-13x ’23e-‘24e EV/EBIT. We now expect Pricer to deliver a ’21-‘24e sales CAGR of 22%, with sales reaching SEK 3.2bn in 2024e (vs. the company’s 2025 target of SEK 4.5bn).
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