Inderes Group - Another period of defending its position well - SEB

Ahead of Inderes’ Q3 report, we make small downward estimate revisions due to softer August sales data than we expected. Despite market headwinds (companies leaving the exchange), the number of new research coverage initiations has been good. We see no material changes to the case, in which higher multiples would require further evidence of conquering the Swedish market. Our fair value range remains unchanged at EUR 19-21.

Q3E: Sales growth of 7% and a seasonally high margin

Following weaker August sales data than we expected, we slightly cut our estimates. We now forecast Q3 growth of 7% y/y and the EBITA margin rising to 21% (18% a year ago) in a seasonally strong profit quarter. We expect Swedish sales to represent c. 21% of total sales, implying c. 20% y/y growth.

August showed the market headwind

Inderes’ August sales increased just 3% y/y. August revenue largely consists of recurring revenue (commissioned research, quarterly result calls and IR software). Although that is broadly in line with growth in the commissioned research agreement base at end-Q2, we had expected IR software to contribute more growth. Our read is that companies leaving the exchange and customers’ savings had an impact on quarterly earnings call demand. However, despite tough market conditions, we think Inderes is defending its position well. We understand Inderes initiated coverage of five new companies during Q3, which sees us slightly raise our year-end estimate for research agreements to 150.

Fair value range unchanged at EUR 19-21

Inderes is currently trading at an EV/EBITDA of 12x, which we do not think is overly demanding, given its capital-light business and solid market position in Finland, which in our view can be well defended. To justify a higher valuation, we believe further evidence of the company’s ability to gain a stronger foothold in Sweden needs to be forthcoming.