Swedencare will report its Q1 results on 12 May. As we remember from the Q4 report, the adj. EBITDA margin came in soft on the back of raw material inflation and freight rates. In the report, the company guided for a bounce-back to >25% EBITDA margins already in the Q1 report due to price adjustments coming into effect as of January. However, this was before the outbreak of the war in Ukraine and the related inflationary climate. Despite this, we believe the company has been relatively well-off given the strong expected improvement to begin with. Hence, we only trim our margin assumptions slightly, expecting an EBITDA margin just a touch below 25% (24.6%) for an EBITDA of SEK 88m, on sales of SEK 357m for the quarter.
2022 industry comments and Swedencare
Looking at what industry peers say regarding the 2022 outlook, we identify two main trends. 1) The general outlook among listed animal health players is for growth between high-single digits up to almost 20%. 2) Companies generally expect margin expansion during 2022. Putting this in relation to Swedencare, the company guidance lies at an organic growth of >20% for the full year, which should result in significant margin expansion. We also expect significant margin expansion during 2022 from the 2021 pro forma base on the back of: 1) scale in the legacy business, 2) volume ramp-up in Vetio from H2’22, 3) the addition of high-margin acquisitions Naturvet and Innovet, and 4) price hikes compensating for the margin drop in H2’21.
Trading ~30% above peers
After only fine-tuning our estimates for sales and EBITDA by roughly +1% during our forecast period, the share is currently trading at an EV/EBITA of 34x-29x on ‘23e-’24e. This corresponds to the share trading ~30% above our animal health care peer group and key peer Vimian.
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