Swedencare will report its Q4 report on Thursday, 17 February. In the report, we expect continued, M&A-driven triple-digit growth to SEK 241m and EBIT of SEK 56m. While the market continues to be strong, the comparables from Q4’20 are tough. Furthermore, visibility into how the company has been affected by the increasing COVID-19 cases, the tricky supply chain as well as increasing raw materials is low. We believe this will put a slight dent in Swedencare’s short-term performance. We trim our estimates by 2% for FY’21, while raising them by almost 70% for ‘23e due to the recent M&A activity. We also expect the company to start reporting PPA amortisations in Q4, making EBITA the relevant measure but having no effect on underlying performance. We have waited to pencil in this until the magnitude is clear, probably in the Q4 report.
M&A activity continues
On 26 January, Swedencare announced its biggest structure deal to date with the acquisitions of NaturVet and Innovet. With NaturVet, the company adds another platform in the US that offers both large-scale production as well as being the top-ranked brand in four of the five largest pet retail chains in the US. This naturally comes with significant synergy potential, not least through the scale-out of vet clinic-heavy Swedencare products through NaturVet’s reach of 15,000 pet shops. On the back of the acquisitions, we raise our estimates for 2023 (first year with full consolidation) by 65% on sales and 69% on EBIT(A).
Valuation down to pre-pandemic levels
After the recent de-rating and EPS-accretive acquisitions, the Swedencare share is now trading at a ’23-24e EV/EBIT(A) of 27-23x. In October 2021, the corresponding ‘23e multiple was 48x. Should we factor in 15% M&A growth into our model until 2026, we could arrive at a value range of ~SEK 90-170, depending on exit multiples of 15-25x, organic grow
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