Svedbergs is expected to release its Q3 report on October 7, with net sales forecasted at SEK 426m (SEK 1 = $0.091) and EBITA at SEK 52m. The company's shares are currently trading at 6.4x NTM Factset cons. EV/EBITA, according to a note.
The Swedish bathroom furniture manufacturer is expected to continue facing challenges in the Nordic market, due to inflation and rising interest rates impacting consumer behavior. Home transactions and building starts have also influenced a more cautious outlook for 2024.
However, Svedbergs' subsidiary Roper Rhodes could continue to outperform the soft UK market, extending its strong performance throughout 2023. Despite more cautious organic growth estimates, foreign exchange movements have offset these concerns, leading to a 1% decrease in net sales forecasts for 2023-2024.
For Q3, similar dynamics as in Q2 are expected, with a forecasted 26% organic decline for Svedbergs. In contrast, Roper Rhodes is anticipated to perform significantly better, contributing to group Q3 net sales of SEK 426m, a decrease of 2% year-on-year and a 9% organic decline.
Despite lower near-term net sales estimates causing opex deleverage, Svedbergs is well-positioned to outperform the soft Nordic home improvement market through its strong and geographically diverse brand portfolio. The company's success in implementing repeated price increases over the last year has been attributed to its brand strength.
Further price revisions in the Roper Rhodes brand have been communicated in the Q2 report, indicating continued strong gross margins for the group. Although there are small (-1%) adjustments to 2023 EBITA due to these factors, further price hikes lead analysts to raise 2024-2025 EBITA by 1%.
For Q3, a similar EBITA decline as in Q2 is expected (-12% vs -11% year-on-year) for an EBITA of SEK 52m, corresponding to a 12% margin and a decrease of 130 basis points year-on-year.
In the long term, macro indicators such as house transactions and build starts are significantly lower than last year. However, near-term sentiment indicators suggest slightly better demand for renovation in the Nordic segment, particularly in less costly product categories. In Europe, pent-up demand from the pandemic in the hospitality sector is expected to continue mitigating lower consumer demand.
For Q3, net sales of SEK 167m are estimated, marking a 1% year-on-year decrease and a 6% organic decline. Despite this, net sales forecasts for 2023-2025 have been raised by 1-2%, driven by foreign exchange movements.
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