Nilörngruppen - Bouncing back with force

Q1 well above initial expectations Operations are bouncing back faster than expected We raise ’21e, ’22e and ’23e EBIT by 35%,13% and 13% Q1 report a knockout punch Nilörngruppen’s Q1 was strong. Sales grew by 25% organically y-o-y, to SEK 175m. The company continues to note that sports and e-commerce customers are driving growth. While the order intake was somewhat weaker than last year, the company has bounced back well from the pandemic.

We continue to argue that Nilörngruppen should reap the benefits from a rebounding fashion market post-pandemic, as the industry was greatly hurt by lockdowns. We note that Nilörngruppen is growing in line or above its targets vs. 2019, speaking for a customer mix that is starting to become increasingly more attractive as well as that new customer sales are running smoothly.

We raise our sales estimates by 6% and 7% ‘21e and ‘23e, feeling confident that customer mix is starting to work as a positive driver, which is the opposite of what has been happening in recent years. Gross margins continue to outperform A large part of the strong profitability (15. 4% EBIT margin Q1’21 vs.

8. 5% Q1’19) was due to the strong gross margin of 46%. We had assumed that the company was going to reach a normal margin of ~44%, but we have now raised this assumption.

This in combination with operational leverage explains our margin revisions of 0. 7pp in ‘22e. After the strong Q1 report, the company is showing that double-digit margins are not far away, and we believe this could be reached in 2021, with a little help from the fact that opex spend is lower as no one is travelling.

We raise EBIT by 35% for 2021e, as we see the company bouncing back from the pandemic a year earlier than we expected, and by 13% for ‘22e and ‘23e, as we now see the margin normalising at a higher level than previously. Trading at low double digits On our updated estimates, the Nilörngruppen share is trading at an EV/EBIT of 12x, 11x and 10x for.