Capacent - Strong start to the year
COVID-19 still affecting new customer intake Higher margins offset sales revision Fair value range of SEK 47-70 (45-68) Q1: Another quarter with impressive profitability Capacent reported Q1 sales of SEK 48. 1m (51. 4m), 10% below our expectations as the second wave of COVID-19 affected new customer intake in Sweden to a greater extent than we anticipated. Finland, on the other hand, saw a sharp recovery y-o-y, with sales of SEK 11.
7m (7. 7m), 54% above our SEK 7. 6m.
Group EBIT was SEK 4. 3m (1. 5m), which was 23% above our forecast despite sales being below estimates.
The deviation was caused by the strong results in Finland, which recorded an EBIT margin of 36. 3% from a strong performance from existing customers and successful outcomes in certain projects with performance-based compensation. All in all, the headwind in Sweden was stronger than anticipated, but Capacent recorded a third consecutive quarter with clear improvements in the EBIT margin y-o-y.
Following the restructuring in Q2’20, the R12 EBIT margin has strengthened every quarter and is now at 8. 7%. Less headwind from lockdowns in Q2 We lower our sales estimates to adjust for the deviation in Q1.
However, Capacent mentioned that it was able to recruit new talent towards the end of the quarter, with these employees set to start their tenures in Q2 and Q3. Together with easing lockdown headwinds in Sweden, we think Capacent will be able to bridge the gap somewhat in ‘22e-‘23e. In total, we decrease our sales forecast by 5%-1.
7% for ‘21-‘23. This decrease is offset by higher EBIT margin assumptions. This results in positive long-term adjustments on the EBIT level.
P/E 7. 9x with 8. 3% div.
yield on revised ‘21e We raise our indicative fair-value range to SEK 47-70 (45-68), which is based on a blend of P/E and EV/EBIT NTM vs. Capacent’s historical valuation. In addition, at 7,9x P/E for ‘21e, Capacent is trading 57% below our peer group of other Swedish consultancy firms.
It also holds a 45% stake in.
