Gabriel Q3'24/25: Solid core execution, cautious stance maintained

Following the Q3 2024/25 results, Gabriel is building confidence in its turnaround, after a cyclical market downturn, and restructuring of its FurnMaster (discontinuing) Mexican subsidiary. Execution in the core continuing operations remained solid with Q3 growth of +5% y/y, and margin expansion, despite macro headwinds. However, the FurnMaster unit had not returned to positive EBIT as expected, showing stabilization rather than rebound. In our view, a current valuation of EV/EBIT 23.9x for 2024/25e does not favour short-term risk/reward, given ongoing carve-out uncertainty and still short-lived growth and margin recovery. We reiterate our Reduce recommendation and slightly raise our price target of DKK 200/share. 

Significant revenue differences in Q3, but earnings outlook increasingly robust

Gabriel’s Q3 2024/25 results revealed a notable shortfall in revenue from discontinued operations compared to expectations, primarily due to the termination of additional non-profitable contracts as the restructuring progressed. FurnMaster was not operationally profitable as expected in Q3, demonstrating stabilisation rather than recovery. However, continuing operations (Fabrics and SampleMaster) delivered solid results, with revenue of MDKK 128.6 (+5% y/y) in Q3 and EBIT after 10 months reaching MDKK 35.7, already within the stated guidance range. Results were driven by strong execution across geographies in the face of market challenges, improving the probability of the still infant growth and margin recovery being sustainable.

Medium-term earnings estimates revised slightly higher on strong margin development

We decreased our medium-term revenue estimates for discontinuing operations following the contract terminations, but with a limited impact on medium to long-run earnings, which remain significantly conservative due to carve-out uncertainty. Continuing operation’s strong gross margins and EBIT margin increase to 8.4% (+2.3 p.p.), driven by strong execution across geographies in Q3, builds confidence in the sustainability of the margin expansion, and leads to a slight mid-term upward revision. But market challenges relating to slow European growth, low housing/refurbishment activity levels, and an ongoing drag on group operating profits from FurnMaster risk disrupting the early growth and margin recovery. The outlook implies continued growth in continuing operations, with higher volumes and greater capacity utilization driving gross and EBIT margin expansion. FurnMaster is expected to gradually recover to slightly above break-even, with lower revenue offset by higher margins, but remaining low on an absolute basis.

We reiterate our Reduce recommendation as valuation does not favour the current risk/reward

In our view, the valuation multiples for 2025/26e of EV/EBIT 23.9x and P/E 24.9x are nearing normalized levels but do not fully reflect still elevated (despite declining) risks relating to an ongoing carve-out of FurnMaster. The DCF tells a similar story of declining risk and improving outlook, but does not yet demonstrate a clear positive risk-reward. We look ahead to triggers which may shift this balance, such as clearer progress on divestments, or solid return to profitability in discontinuing operations, further evidence that the current margin recovery is durable beyond 2024/25e, and further balance sheet strengthening.

Disclaimer: HC Andersen Capital receives payment from Gabriel for a research and DigtialIR/corporate visibility subscription agreement / Philip Coombes 08:15 01 September 2025