Embellence Group: Artscape distorts progress in Q4e - ABG
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* We expect broad-based organic growth
* Q4e net sales of SEK 193m, EBITA of SEK 25m
* We reiterate our SEK 36-43 fair value range
All companies but Artscape to grow 4-5% org. in Q4e
We expect little deviation from the YTD momentum into Q4. On tougher Artscape-related comparable growth figures (and -20% org. growth in Q4 y-o-y), we expect Embellence Group to report ~flat organic growth y-o-y. We forecast around 5% org. growth for the other group companies. We note that Embellence Group is minimally exposed to transaction effects in FX and we expect insignificant changes to the gross margin vs Q3 and y-o-y. We do not expect meaningful underlying changes to SG&A costs from earlier in the year, as we forecast a level in line with Q2. All in all, we forecast adj. EBITA of SEK 25m, -9% y-o-y driven by the tough comp for Artscape, for a margin of 12.8%. We expect Embellence's Board to propose a DPS of SEK 1.5, 53% of EPS, vs SEK 1.25 for 2024.
FX drives EBITA cuts of 4% for '26e-'27e
We cut '26e-'27e EBITA by 4% in this note, of which 3pp is related to the gradually stronger SEK vs the EUR and USD since our last update. We make limited changes otherwise: we raise our SG&A cost estimates slightly to account for a higher sales focus and increased efforts in upgrading the online platforms; Boråstapeter's website is the next one to be upgraded since Cole & Son's website was upgraded in Q4.
We reiterate our SEK 36-43 fair value range
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 6.8x-7.8x NTM. Embellence Group is inching closer to its 15% EBITA margin target; we expect it to be reached in LTM terms in Q4'25e, and we also forecast 11-12% post-lease FCF yields for '26e-'27e.
* Q4e net sales of SEK 193m, EBITA of SEK 25m
* We reiterate our SEK 36-43 fair value range
All companies but Artscape to grow 4-5% org. in Q4e
We expect little deviation from the YTD momentum into Q4. On tougher Artscape-related comparable growth figures (and -20% org. growth in Q4 y-o-y), we expect Embellence Group to report ~flat organic growth y-o-y. We forecast around 5% org. growth for the other group companies. We note that Embellence Group is minimally exposed to transaction effects in FX and we expect insignificant changes to the gross margin vs Q3 and y-o-y. We do not expect meaningful underlying changes to SG&A costs from earlier in the year, as we forecast a level in line with Q2. All in all, we forecast adj. EBITA of SEK 25m, -9% y-o-y driven by the tough comp for Artscape, for a margin of 12.8%. We expect Embellence's Board to propose a DPS of SEK 1.5, 53% of EPS, vs SEK 1.25 for 2024.
FX drives EBITA cuts of 4% for '26e-'27e
We cut '26e-'27e EBITA by 4% in this note, of which 3pp is related to the gradually stronger SEK vs the EUR and USD since our last update. We make limited changes otherwise: we raise our SG&A cost estimates slightly to account for a higher sales focus and increased efforts in upgrading the online platforms; Boråstapeter's website is the next one to be upgraded since Cole & Son's website was upgraded in Q4.
We reiterate our SEK 36-43 fair value range
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 6.8x-7.8x NTM. Embellence Group is inching closer to its 15% EBITA margin target; we expect it to be reached in LTM terms in Q4'25e, and we also forecast 11-12% post-lease FCF yields for '26e-'27e.