Flügger extensive report: Painting a profitable recovery

Flügger took a solid step forward in 2024/25 in the recovery from a cyclical downturn, following the Covid-19 demand surge and resulting inflationary period. Management’s greater focus on the core professional painter segment in combination with controlled organic growth in the higher margin International market, can support continuing moderate revenue growth and sustained margin and EPS growth. We see a favourable risk/reward based on absolute and relative valuation and initiate our coverage of Flügger with an ”Accumulate” recommendation and price target of DKK 370.

Nordic coatings group with international growth engine

Flügger is a family-controlled decorative paints company with strong market positions in the Nordics and a growing footprint in Central Europe. The group operates through three segments: Nordics, International, and Partnerships. Nordic earnings are recovering gradually as housing and renovation activity remains subdued, while the International segment, driven primarily by Poland, has become the key growth engine, with double-digit revenue growth in recent years. The Partnerships segment (notably Unicell in Poland and Eskaro in Ukraine) adds steady revenues, with upside potential from future reconstruction of Ukraine. Under the Flügger Organic strategy (2024-2027), the company is refocusing on professional painters, adding stores internationally, expanding market access through partnerships, and maintaining cost discipline after years of store consolidation.

Margins to expand with focus on more profitable segments

With a revenue CAGR of 3.8% 2024/25-2027/28e, we model moderate growth within historical range. Despite modest growth, margins are forecast to expand. Growth in the higher-margin International segment, focus on core professional customers adding value, a shift in product-mix towards higher-margin own-brands, away from white labels, and an operating leverage effect from relatively stable production and store costs. A return to revenue growth and margin expansion enables double-digit EBIT growth from 2024/25 to 2027/28e.

Deleveraged balance sheet and moderate CAPEX support increasing shareholder return

We expect strong cash flow as recent factory capacity upgrades enable moderate CAPEX in the medium term. The balance sheet is deleveraged, with net bank debt/EBITDA around 1.0x at end-2024/25, and increasing cash flow from rising profitability enables a high payout ratio and estimated dividend yield >7%.

Absolute and relative valuation support favorable total return profile

Our DCF-based model implied fair value price of DKK 385 per share highlights the value to be unlocked from a sustained recovery. Despite uncertainty remaining in the timing and pace of a continued market strengthening, the DCF value supports long-term value creation. The estimated absolute EBIT growth and resulting strong cash flow support and increasing dividend outlook, with a sustained yield >7% while downside risk is reduced following deleveraging, despite the ongoing sanctions case, and trading multiples are reasonably priced compared to peers. We believe that Flügger’s expected return exceeds the required rate of return over the next year and medium term, supported by a range of valuation methods, and therefore initiate our coverage with an “Accumulate” recommendation and price target of DKK 370 per share.

Disclaimer: HC Andersen Capital receives payment from Flügger for a research and DigtialIR/corporate visibility subscription agreement / Philip Coombes 08:00 17 September 2025; updated 09:33 17/09/2025