DistIT - Reversed profit warning – significant EBIT beat
EBIT of SEK 45-50m expected (+53% vs. ABGSCe) Own products and cost control behind beat Encouraging progress; 21’e EV/EBIT of 7x pre Q4 Preliminary Q4’20 results DistIT has published preliminary results for Q4’20, with expected revenues of SEK 730-750m (+1% vs. ABGSCe at 730m), and most notably, an EBIT of SEK 45-50m (+53% vs. ABGSCe at 31m).
This implies a remarkable EBIT margin of 6.4%, which is the highest margin since 2010. In its press release, the high profitability is attributed to strong performance of own brands and cost effectiveness. The full Q4’20 report is due on 23 February.
A platform of own brands for margin expansion We argue that today’s news bode well for a good 2021, both due to the fact that there seems to be a solid demand for DistIT’s margin accretive own brands, but also as we believe that the trimmed cost-base will allow for better operational leverage with volumes returning in 2021. We currently estimate an EBIT margin of 5% in ‘22e, up from 3% in 2019, which results in 40% EBIT CAGR ‘20e-‘22e. ’21 looks intriguing as demand normalises On our estimates, the share is trading on EV/EBIT ’21e of 5.6x, ~22% below its 5Y historical average.
We are seeing strategic initiatives playing out, with the savings programme having effectively lowered costs and own products delivering high margin accretive growth..