DistIT - New estimates to reflect preliminary Q4 results

New estimates to reflect preliminary results EBIT up 24% for ‘20e and 9-10% for ‘21e-’22e Q4 report due February 23 New estimates in line with preliminary Q4’20 results We have updated our estimates for Q4’20e to reflect the preliminary results of sales of SEK 730-750m and EBIT of SEK 45-50m. We are in the middle of the range with sales of SEK 740m, EBIT of SEK 48m and an EBIT margin of 6. 4%. We believe the strong performance is a result of strong cost control, and we estimate opex of SEK 111m, down 1% y-o-y, and a good performance from the high-margin own brands delivering a gross margin of 22.

3%. Own brands likely behind the strong performance We raise our assumptions for the company’s own brands and assume that they will be c. 30% of sales in Q4’20e (previous estimate of 27%), up from 23% in Q4’19.

This implies organic growth of c. 36% y-o-y, and we believe this supports the case for a more rapid increase of own brand sales than we originally thought. As a result, our EBIT margin assumptions for ‘21e and ‘22e are up to 5.

0% and 5. 5% for ‘21e and ’22e, respectively, up from 4. 6% and 5.

0%. Share view The share is trading at a ’21e EV/EBIT of 6. 8x, or ~19% below its 5-year historical average.

We are seeing strategic initiatives playing out, with the savings programme having effectively lowered costs and the own brands delivering high-margin growth. This should help drive a 31% EBIT CAGR for ’20e-’22e and c. 10% lease adj.

FCF yields.