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Third party research

Generic: Prioritising growth over margins - ABG

Generic Sweden

This is a third party research report and does not necessarily reflect our views or values

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22% organic sales growth y-o-y
Lower than expected gross margin
Price increases should help gross margin in Q2


Q1: Sales growth of 22%, EBIT margin of 16.3% (21.3%)

Generic's Q1 numbers were quite eventful as there was a new strategic direction prioritising growth opportunities over margins mid-term. The company reported net sales of SEK 42.2m (+22% y-o-y, all organic), and EBIT was SEK 6.9m (7.4m). This was 5% above our expectations on sales but 14% below on EBIT. The main reason for the lower profitability was a lower than expected gross margin as new customers with a higher degree of volume sales dilute gross margins as opposed to smaller customers with a higher degree of platform fees. The q-o-q drop in gross margin was steep, but it will be somewhat offset by price hikes in the coming quarters. Additionally, the Swedish Social Insurance Agency signed a brand-new agreement with Generic for 2+2 years, which we think is testimony to the good execution on the deal entered with them in 2020.