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Third party research

Embellence Group: Largest DTC platform to be upgraded in H1 - ABG

Embellence Group

This is a third party research report and does not necessarily reflect our views or values

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* Good underlying growth, investing for the future weighs on margin
* DTC could accelerate in 2026
* The share is trading at 7x-6x '26e-'27e EV/EBITA

Investing for the future

Embellence Group's Q4 report showed strength for the Nordic parts of the business, and Artscape performed well considering the tough comparable growth figure, while Cole & Son and Wall & Decó faced softer demand. It has taken action to turn the trend - Cole & Son's managing director has been replaced and the German sales agents for Wall & Decó have been as well. Overall, the organic growth was 0.5%, reduced by ~4pp from the tough Artscape comp. The underlying momentum thus seems healthy. Gross margins improved by 120bp, but Embellence Group also invested more in, e.g., platform upgrades and hospitality sales to drive growth for a net -60bp margin growth y-o-y.


More numbers on DTC - looks promising

Embellence Group's strategic investments continue; in Q4 it upgraded its Cole & Son website after the successful upgrades of its Artscape and Pappelina websites. While the DTC share is still small, 40% y-o-y growth for Artscape+Pappelina in the DTC part of the business is a promising signal as Embellence Group prepares to upgrade its Boråstapeter website. In 2025 as a whole, Embellence Group's DTC business grew 18% organically y-o-y, and website upgrades did not start until the summer. Boråstapeter is ~2x larger than Artscape and Pappelina combined - so this upgrade is likely to have a larger impact on growth than the previous ones.


The share is trading at 7x-6x '26e-'27e EV/EBITA

The Embellence share is trading at 7x-6x our '26e-'27e EV/EBITA. We leave our fair value range unchanged at SEK 36-43, which corresponds to 8x-9x NTM EV/EBITA vs. its L3Y trading range of 7x-8x NTM. The negative estimate revisions relate to FX. While the rough capex guidance for 2026 was higher than our previous estimate to ramp up upgrades in the Borås factory, we estimate a 10-13% FCF yield '26e-'28e on revised estimates.
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