Inderes Group - April-May sales data triggers estimate cuts - SEB

Ahead of Inderes’ Q2 report we broadly reverse our previous estimate increases following the April-May sales data. Despite cutting our estimates we find that Inderes is heading to a healthy profit improvement in 2023. This is thanks to the acquired Swedish operations, organic growth and ramp-up investments made to Sweden in 2022. Our fair value is pulled back to a range of EUR 26-29 (from 28-31).

Q2 expectations – Estimates down following released April-May sales

April and May sales data came in somewhat soft vs. our previous Q2 estimate. Hence, in addition to a Q2 sales cut of 8% we lower slightly our forward-looking sales estimates as well. The cut is owing partly to a weaker SEK, but we also think that the event business outside listed companies will continue to be moderate in the current uncertain macro environment. We expect Q2 sales of EUR 4.7m and EBITA of EUR 0.5m.

Sweden is a long-term game

Inderes has increased its research coverage in Sweden. However, in addition to few paying customers the company has initiated coverage for free in selected large names. This is virtually an opex investment, which we see necessary in order to gain investor attention. Unlike in Finland, Inderes lacks the first-mover position in commissioned research. However, it has already established a position in the virtual event business in listed company markets. Also, investors’ attention can be attracted with Finnish equity analysis content. Nevertheless, gaining critical mass in Sweden will take time and during the investment phase profitability remains below potential. In the Q2 report we will continue to focus on management’s comments on progress in the Swedish market.

Fair value range down back to where it was prior to strong Q1

Our DCF valuation (using a WACC of 9.0%) declines to EUR 29 and our fair value range using DCF and peer group multiple benchmarking declines to EUR 26-29.