Relais: Against strong Q1 comparison figures

Translation: Original published in Finnish on 5/6/2025 at 9:35 pm EEST.

Relais will publish its Q1 results on Tuesday next week. As the conditions in the comparison period were favorable, the company is going against strong numbers, which we do not expect to be achieved in the first quarter despite the acquisitions. We have incorporated the recent acquisitions into our forecasts, which reflect a significant increase in our forecasts for the current and especially the coming years. Given the quality of the properties and the purchase prices paid, we believe their value creation potential is quite good. Thus, we raise our target price to EUR 17.0 (was EUR 16.5), but due to the recent rise in the share price, we lower our recommendation to Accumulate (was Buy).

Excellent conditions in the comparison period

We forecast Relais's Q1 revenue to increase slightly above the comparison period to 83.4 MEUR. The revenue growth in our forecasts is driven by the acquisitions of Asennustyö M. Ahlqvist and Team Verkstad Sverige in the repair and maintenance business. In addition, we expect the Commercial Vehicle Repair and Maintenance business to have remained at roughly the market growth rate of 2% organic growth. Against this backdrop, we forecast that the reported growth of the business reaches 16% as a whole. At the same time, however, we expect revenue in the Technical Wholesale and Products business to have decreased organically by 6%. This reflects the rather favorable winter conditions in the reference period, i.e., a cold winter, whereas this year's winter was quite mild.

Reflecting the decline in revenue from the higher-margin product business and, on the other hand, a slightly changed revenue distribution due to acquisitions, we forecast that Relais' EBIT excluding PPA amortization decreased from a fairly good level in the comparison period to 8.5 MEUR, which corresponds to a 1.5pp decline year-on-year. However, reflecting the exceptionally high net financing expenses in the comparison period, we forecast Q1 reported EPS to reach the comparison period level of EUR 0.21 per share.

Acquisitions included in forecasts

Relais does not usually provide guidance, but its financial target of 50 MEUR pro forma comparable EBITA sets the bar for the current year. In this report, we have included in our forecasts the Matro Group and Team Verksted Holding acquisitions announced in April, which the company expects to be reflected in its figures from the second half of this year. Against this backdrop, our EBITA forecast for the current year rose by 11% to just over 37 MEUR, while our corresponding forecast for next year, which rose by 25%, settled at just short of 44 MEUR. Therefore, the company's financial target is not very far off after the announced acquisitions, and we would consider keeping it unchanged quite unsurprising at this point of the year.

Upside in the valuation

Based on our forecasts, the P/E ratios adjusted for goodwill amortization for 2025-2026 are approximately 11x and 9x, and the corresponding EV/EBITA ratios are roughly 12x and 9x. In our view, the earnings-based valuation for the next few years is moderate, considering that the recent large-scale acquisitions will not be fully reflected in the results until next year. With our updated forecasts, Relais is also valued at a discount (8%) relative to its industry peers, while the valuation difference is even remarkably large compared to serial consolidators operating with a similar business model. This overall attractive valuation is also supported by our cash flow model, which is at our target price level. Thus, in our view, Relais' acquisition-driven growth story can still be accessed with a fairly cheap price tag.