Humble Group: Positioned in the sweet spot - ABG
This is a third party research report and does not necessarily reflect our views or values
Keeps steady acquisition paceWell positioned for a tougher marketCurrently trading at 10-8x EV/EBITA ’23e-‘24e
Key takes from the Q2 reportThe Q2 report was a slight miss on the top line, with SEK 981m vs our 1,020m but the organic pro forma growth of 23% impressed. A strong gross margin of 35.1% (160bp vs. ABGSC est.) was driven by favourable product mix that facilitates pricing power in the current environment. Adj. EBITA of SEK 82m was a slight miss vs. our estimates. Importantly, though, Humble is growing well above its financial target on a pro forma basis, reaching sales of SEK 1.5bn and adj. EBITDA of SEK 117m, implying that 37% of the sales target and 34% of the adj. EBITDA target were fulfilled on a LTM basis. There appears to be no scarcity of acquisition targets, with two confirmed acquisitions to date during Q3’22.
Outlook: strong growth, margin expansionWaning consumer sentiment in general suggests that H2’22 may be challenging. However, we believe that Humble is positioned in the sweet spot of current consumer trends with a material exposure to discount retailers. Additionally, price adjustments were implemented at the beginning of Q3’22, offsetting a fair share of the current COGS inflation. Due to the swift organic growth pace and additional M&A, we expect working capital to grow further. Furthermore, we stress that Q4’22 is a seasonally strong quarter for the group. As such, we forecast higher inventory levels in Q3’22e but a slight release after the Christmas trading. From Q3 onwards, three large acquisitions will be consolidated, of which the Privab companies are expected to add ~SEK 820m to FY sales whereas we calculate a dilutive effect of ~70bp on the EBITDA margin for ’23e-‘24e. Lastly, we forecast a net debt of SEK 2.7bn (5.2x EBITDA) at the end of FY’22e.
Trading at 10-8x EV/EBITA ’23e-‘24eAs we add the abovementioned acquisitions to our estimates, we raise our ‘23e-‘24e adj. EBITA by 12-10%. Humble is currently trading at a corresponding ‘23e-...Läs mer på ABG Sundal Collier
Key takes from the Q2 reportThe Q2 report was a slight miss on the top line, with SEK 981m vs our 1,020m but the organic pro forma growth of 23% impressed. A strong gross margin of 35.1% (160bp vs. ABGSC est.) was driven by favourable product mix that facilitates pricing power in the current environment. Adj. EBITA of SEK 82m was a slight miss vs. our estimates. Importantly, though, Humble is growing well above its financial target on a pro forma basis, reaching sales of SEK 1.5bn and adj. EBITDA of SEK 117m, implying that 37% of the sales target and 34% of the adj. EBITDA target were fulfilled on a LTM basis. There appears to be no scarcity of acquisition targets, with two confirmed acquisitions to date during Q3’22.
Outlook: strong growth, margin expansionWaning consumer sentiment in general suggests that H2’22 may be challenging. However, we believe that Humble is positioned in the sweet spot of current consumer trends with a material exposure to discount retailers. Additionally, price adjustments were implemented at the beginning of Q3’22, offsetting a fair share of the current COGS inflation. Due to the swift organic growth pace and additional M&A, we expect working capital to grow further. Furthermore, we stress that Q4’22 is a seasonally strong quarter for the group. As such, we forecast higher inventory levels in Q3’22e but a slight release after the Christmas trading. From Q3 onwards, three large acquisitions will be consolidated, of which the Privab companies are expected to add ~SEK 820m to FY sales whereas we calculate a dilutive effect of ~70bp on the EBITDA margin for ’23e-‘24e. Lastly, we forecast a net debt of SEK 2.7bn (5.2x EBITDA) at the end of FY’22e.
Trading at 10-8x EV/EBITA ’23e-‘24eAs we add the abovementioned acquisitions to our estimates, we raise our ‘23e-‘24e adj. EBITA by 12-10%. Humble is currently trading at a corresponding ‘23e-...Läs mer på ABG Sundal Collier