Swedencare: Lower estimates and higher valuation premium - ABG

Cut to Q2e on lagged price increases and softer demand We cut ’22e-’24e EBITA by 6-5%, on tougher environment Trading at a premium of ~40% to peers, ~65% to Vimian Price increases implemented later than indicated We think that the Q2 report will be on the soft side, without a sequential margin expansion. Price adjustments (mainly on Amazon) do not seem to have been implemented as planned, with a large share of the indicated April hikes implemented in May instead. At the same time, we expect cost increases to have been passed through. This holds back the sequential margin expansion that we previously had in our numbers. Our estimates imply a deterioration in underlying margins as the full quarter contributions from the acquired Innovet and NaturVet should be margin accretive by ~1pp. Although animal health and Swedencare should see resilient demand, our industry checks indicate trade downs and less expansion in dermatology products. Comps remain challenging, as in Q1’22, due to the abnormally high activity witnessed last year in veterinary clinics. We expect that clinic visits are down by low single-digits y-o-y, but that price hikes should offset the volume decline. We expect organic growth of 7% in Q2’22e.