Swedencare - Solid delivery despite pawsed orders
Q1 report in line on profitability Delayed orders proved a drag on sales Underlying estimates relatively unchanged Solid start to the year Swedencare’s Q1 report involved several moving parts. Sales were SEK 134m, up 255% y-o-y (25% organic) and 5% below our expectations at SEK 141m. While we expected organic growth of 30%, the company saw some disruptions in its supply chain during the quarter, and these have affected deliveries. These orders will instead be delivered in Q2 and onwards.
On the conference call, we inquired as to the scale of the volumes delayed, and the company stated that it was at least USD 1m, or ~SEK 8. 5m. As such, sales would have come in above our expectations given full execution.
Note that orders falling between quarters is not a new phenomenon – this is the nature of Swedencare’s business model. All in all, we make minor underlying changes to our full-year sales estimates. Profitability shines through Despite sales missing by 5%, adj.
EBIT came in at 36m, 2% below our expectations. This is despite the company spending resources on consolidating logistics in its US subsidiaries, which cost SEK 0. 7m in Q1.
As such, we conclude that profitability is holding up nicely, a view that was further strengthened by the CFO’s comments about opex scalability on the conference call. Furthermore, the Rx acquisition will naturally increase profitability with its 30% EBIT margins. Estimate changes related to Rx acquisition We raise our ’21-‘23e sales and adj.
EBIT estimates by 9-12% and 10-13%, respectively, due to the inclusion of the Rx pharmaceuticals acquisition a few weeks back. Swedencare continues its M&A journey, adding high-margin businesses with a clear rationale in terms of cross-selling and logistic synergies. On our updated estimates, the share is trading at an adj.
EV/EBITDA & adj. EV/EBIT(A) ‘21e-‘23e of 65x-43x & 68-45x, respectively. This corresponds to the share trading 63-31% & 44-18% above M&A animal health peers on 2021-23e.
