Urb-it - A perfect storm - ABG

Q4 revealed the highest sales ramp-up so far… …but cost base increased on lockdown disruptions Share trading at EV/Sales of 6.1x-2.8x in ‘22e-‘23e Takeaways from Q4 report: higher costs to ensure growth Urb-it reported its highest sales so far, growing 274% y-o-y (114% q-o-q) to SEK 16m (+10% vs ABGSCe 14.5m). As expected, the ramp-up came from a volume hike driven by partnership signings and higher demand during the holiday season. As such, Q4 constituted 47% of FY’21 sales (SEK 34m, +173% y-o-y). As we had feared, however, Urb-it suffered from lockdown-related disruptions, hampering the availability of couriers and forcing Urb-it to use costly external alternatives to ensure deliveries. This resulted in an EBIT drop of 219% y-o-y to SEK -43m (-54% vs ABGSCe -28m). This issue was also reflected in the cash flow, where SEK 2.7m was spent on strengthening delivery capacity. Consequently, the operating cash flow continued to decline to SEK -34m while the total cash flow saw an upswing to 110m on the back of the share issuances in Q4. Overall, we take a positive view on Urb-it prioritising growth as we think taking care of its partnerships is key to Urb-it’s growth journey, although it comes with higher costs in the short- to mid-term. Volumes should continue up, but we fear a higher cost base While Q4 added confidence in terms of ramping up volumes, we fear that the cost base could continue to increase from here. For instance, we believe that the expansion to Spain could come with increased costs. As such, we lower our ‘22e EBIT by 57%, which translates to Urb-it breaking even on EBIT in Q4’23e. Furthermore, although we expect volumes to continue ramping up, we lower our ‘22e-‘23e sales by some 7-2%, respectively, as Urb-it has cut down on some partners that are not living up to initial expectations. We lower our value range to SEK 2-10 (3-14) per share On our updated estimates, the Urb-it share is trading at EV/Sales 6.1x-2.8x in ‘22e-‘23e. Following our estimate revisions, ... Läs mer på Introduce