Gabriel Q3'2024/25 preview: Earnings momentum builds, but risks remain

Following the Q2 2024/25 results and subsequent guidance upgrade, Gabriel is beginning to distance itself from the challenges seen in 2023 and 2024. This rebound is being driven by improving operating leverage in Fabrics and SampleMaster (continuing) and a return to profitability in FurnMaster (discontinuing). Still, we remain cautious: the carve-out process is incomplete, macro conditions remain mixed, and Gabriel’s ability to sustain earnings momentum beyond FY24/25 is not yet proven. We restate our “Reduce” recommendation but raise our price target to DKK 190/share and look for the full Q3 report for details on the sustainability of the recovery. 

Outlook firming up after strong execution in both continuing and discontinuing operations

The upgraded FY24/25 revenue guidance for continuing operations of MDKK 510-520m (from 485-530m in connection with Q2) implies full-year growth of 6.5% y/y supported by better demand across Europe and Asia. The mid-point guidance for continuing operations reflects a slight slowdown in the seasonally weaker H2, but in the context of tariffs and ongoing market challenges, indicates a continued turnaround. EBIT guidance has also been lifted twice post Q2 to MDKK 35-40 (from MDKK 20-30 in connection with Q2), with the mid-point now implying 90% EBIT growth y/y and a 7.3% EBIT margin, up from 4.1% in 2023/24 as capacity utilization and operating leverage drive margin expansion. However, with Gabriel already delivering EBIT of MDKK 35.7 by July, the fact that guidance has only been revised marginally higher despite significant EBIT outperformance suggests continued caution from management.

Forecasts revised on strong margin recovery, but the durability of growth momentum remains uncertain

We raise our group revenue estimate to +5% y/y from +2%, and EBIT is now projected at MDKK 43 (up from MDKK 23), driven by stronger-than-expected margin expansion in continuing operations and the return to FurnMaster profitability in Q3. Topline expectations for continuing operations are slightly trimmed to DKK 514m (6.5% y/y), down from MDKK 522 (+8%), given the updated guidance. FurnMaster estimates are revised significantly higher following the surprise strength in Q3 2024/25 and now expect revenue of MDKK 439 (+2.5% y/y), from MDKK 411 previously (-4.0% y/y). We also raise FurnMaster’s full-year EBIT estimate to MDKK 4 from MDKK -9 previously. Medium-term group EBIT estimates for 2026e and 2027e are also raised, but mostly reflecting elevated base effects, as we await clarity on the sustainability of improving results in the face of mixed markets.

Risk/reward is improving but further context needed

Revised estimates and the outsized impact on absolute EBITDA and EBIT, given low levels, have brought Gabriel’s valuation more in line with Nordic housing market-related peers (around EV/EBITDA 9x 2025e and EV/EBIT 15x 2025e). However, some short-term uncertainty discount may be justified to reflect the ongoing FurnMaster carve-out, elevated gearing level of NIBD/EBITDA LTM of 5.4x. However, greater confidence following the full Q3 results with greater clarity on cash flow, gearing, the ongoing carve-out, and market conditions may support a narrowing of the uncertainty discount. While markets remain challenging, the upgrades signal cautious optimism as we await the full Q3 2024/25 results.

Disclaimer: HC Andersen Capital receives payment from Gabriel for a DigitalIR and research agreement./Philip Coombes 07:50 27/08/2025