BHG: We expect a solid set of Q2’21 numbers - ABG
This is a third party research report and does not necessarily reflect our views or values
We expect organic growth of 12%...
We believe that BHG is likely to report another set of solid numbers on 22 July. With several strong trading updates from DIY peers (e.g. Kesko and Byggmax), we expect the DIY division to be the key driver of growth, as seen in previous quarters. We expect organic growth of 13% y-o-y or 71% versus Q2’19 in DIY. The corresponding figures in Q1’21 were 45% and 79%, respectively. Furthermore, we forecast a slight deceleration in the Home Furnishing segment, which we believe has been negatively affected by eased restrictions and weather. Our estimates suggest organic growth of 10% y-o-y or 45% versus Q1’19. All in all, we forecast organic sales growth of 12% for the group. In addition, acquisitions are expected to add just below 14% to sales whereas adverse FX could hit sales by -1%. Hence, our total sales estimate of SEK 3.3bn corresponds to total growth of 24%.
…and a stable adj. EBIT margin of 8.5%
Continuously supportive product mix, price efficiency and slight FX tailwinds are expected to render a 50bp gross margin expansion. However, we fear that competition for marketing space has become stiff and we estimate higher marketing spend as a consequence. As such, our adj. EBIT margin estimates suggest a level roughly in line with Q2’20 at 8.5%. In absolute terms, adj. EBIT is expected at SEK 285m.
Estimates trimmed by ~1%
Due to a significant slowdown in search volumes, and supported by the weak trading update from Desenio, we have cut our sales assumptions for Home Furnishing by 2%, 1% and 1% in ‘21e, ‘22e and ‘23e, respectively. Consequently, our group adj. EBIT has been lowered by 0.6% to 0.9% over the coming three years. We have yet to include the HYMA acquisition into our estimates (pending approval in Q3’21e), which could add 3-4% to ’22-‘23e EPS. We have left our valuation range of SEK 88-224 unchanged, as lower estimates are offset by rollover effects.
We believe that BHG is likely to report another set of solid numbers on 22 July. With several strong trading updates from DIY peers (e.g. Kesko and Byggmax), we expect the DIY division to be the key driver of growth, as seen in previous quarters. We expect organic growth of 13% y-o-y or 71% versus Q2’19 in DIY. The corresponding figures in Q1’21 were 45% and 79%, respectively. Furthermore, we forecast a slight deceleration in the Home Furnishing segment, which we believe has been negatively affected by eased restrictions and weather. Our estimates suggest organic growth of 10% y-o-y or 45% versus Q1’19. All in all, we forecast organic sales growth of 12% for the group. In addition, acquisitions are expected to add just below 14% to sales whereas adverse FX could hit sales by -1%. Hence, our total sales estimate of SEK 3.3bn corresponds to total growth of 24%.
…and a stable adj. EBIT margin of 8.5%
Continuously supportive product mix, price efficiency and slight FX tailwinds are expected to render a 50bp gross margin expansion. However, we fear that competition for marketing space has become stiff and we estimate higher marketing spend as a consequence. As such, our adj. EBIT margin estimates suggest a level roughly in line with Q2’20 at 8.5%. In absolute terms, adj. EBIT is expected at SEK 285m.
Estimates trimmed by ~1%
Due to a significant slowdown in search volumes, and supported by the weak trading update from Desenio, we have cut our sales assumptions for Home Furnishing by 2%, 1% and 1% in ‘21e, ‘22e and ‘23e, respectively. Consequently, our group adj. EBIT has been lowered by 0.6% to 0.9% over the coming three years. We have yet to include the HYMA acquisition into our estimates (pending approval in Q3’21e), which could add 3-4% to ’22-‘23e EPS. We have left our valuation range of SEK 88-224 unchanged, as lower estimates are offset by rollover effects.