Swedencare - New financial targets

Q4 sales & EBITDA +7% & -2% vs. ABGSCe Est. changes mainly related to Holden2 consolidation Financial targets imply 15x 2025e EBIT Continued strong tempo Swedencare’s Q4 report was strong, beating our sales forecast by 7% for sales of SEK 101m. The company grew its sales organically by 32% (ABGSC 25%), showing that it is continuing to capitalize on the fast-growing pet market.

In his comments, CEO Mr Lagerberg pointed out that even mature markets are posting growth in new-born dogs & cats of 10%. The effect of this is not likely to be seen for Swedencare immediately, as the company’s product offering is more suited to non-new-borns, but it is a good sign for underlying market growth, which already had a strong outlook, in the coming years. EBITDA was in line (SEK 32m, -2% vs.

ABGSCe) due to slightly higher opex than we had anticipated. Overall, we make minor positive underlying estimate changes, with the bulk of our revisions being related to the consolidation of Holden2. ‘21e-‘22e EBIT revisions of 15-19% based on Holden2 We consolidate Holden2 into our numbers, raising sales by 32-35% and EBIT by 15-19%.

With Mr Lagerberg saying in the Swedish business press a few months ago that he is counting on more M&A activity in 2021, we would assume the pipeline looks solid. However, given the tempo of M&A in 2020, we are cautious about expecting the same pace this year. With all the acquisitions in 2020 coming with clear synergy potential, we assume that a significant focus will be on realizing this in 2021.

New financial targets imply 15x EBIT 2025e As promised, Swedencare gave new financial targets in its Q4 report. The company is aiming for SEK 2bn in sales with an EBIT margin of at least 30% in 2025. It aims to reach this through 20-25% organic growth and the rest being M&A-driven.

If we assume an EBIT margin of 30% on 2025e sales of SEK 2bn, we arrive at an implied 2025e EV/EBIT of c. 15x. In the short term, on our updated estimates, the share is trading.