Swedencare’s Q4 report had many moving parts. Sales grew by 154% (of which 10% organic) and came in at SEK 255m, 6% ahead of our expectations. We had anticipated, as has been the case in all quarters during 2021, that the company would be negatively affected by delayed orders. Although this was the case, the organic momentum was strong enough to offset it. Furthermore, the company noted mixed organic growth momentum in newly acquired companies not contributing to organic growth yet. Rx and Holden2 grew above the group average, while the CDMO Vetio saw negative growth due to the external headwinds. The latter name has several large volume contracts ramping up during 2022. On the back of the momentum, the company guided for organic growth of above 20% during the year, vs. 17% in ’21. We believe this is feasible given the different projects ongoing, currently estimating 20% organic growth after no major changes to our top-line estimates in absolute terms.
Guiding for a margin bounce-back in Q1
The negative surprise in the report was the margin. The adj. EBITDA margin came in at 19% for an adj. EBITDA of SEK 48m, 23% below our expectations. The margin has been negatively affected by raw material costs, supply chain constraints, capacity investments and personnel ramp-up. However, with price hikes in place and volumes growing in the new organisation, the company stated that the EBITDA margin should be at least 25% already in Q1. This is still below what we had previously assumed, though, and we find ourselves lowering our EBITDA estimates by 7%-5% for ‘22e-‘23e. The large deviations on EBIT were due to the inclusion of PPA amortisations, which are non-cash items.
Trading at ’23-‘24e EV/EBITA of 27x-23x
On the back of our estimate changes and the negative share price reaction today, Swedencare is currently trading at a
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