* Net sales SEK 201m, +1% vs ABGSCe * EBITA SEK 28m vs ABGSCe SEK 27m * The share is trading at 7-6x '26e EV/EBITA
Q1: In line, transformation weighed on margins
Overall, we believe Embellence Group's Q1 report is in line with our expectations. Net sales of SEK 201m was +1% vs ABGSCe and corresponded to organic growth of 3%. Growth was driven by the Boråstapeter, Pappelina and External manufacturing segments, which grew 5%, 18% and 21% respectively. We had expected Boråstapeter to grow 2%, Pappelina to grow 3% and External manufacturing to grow 20%, for reference. Gross margins were 62.8%, +80bp y-o-y driven partly by a higher share of DTC sales, which coupled with a higher opex ratio owing to initiatives to drive future growth, e.g. the replacement of Cole & Son management, resulted in a 14.0% EBITA margin, -180bp y-o-y. EBITA of SEK 28m was +3% vs ABGSCe SEK 27 and corresponded to y-o-y growth of -13%. Embellence Group's tendency not to adjust for costs that could be considered one-offs (such as management severance costs in Cole & Son) means the -13% y-o-y figure is larger than the underlying development would suggest, but we do not know the magnitude of these costs.
Outlook: Boråstapeter has been upgraded in April
In its Q4 report, Embellence Group said that it expects to upgrade the Boråstapeter platform during H1'26. Boråstapeter is the largest brand in the Group, which suggests that this could be the most impactful upgrade. In Q1, we get an update about the work, as the CEO says that it went live in the end of April. In the Q4 report, the CEO also noted that recent organisational changes means the Group is now stable enough to resume looking for M&A targets. This sentiment is repeated in the Q1 report in which it also reports leverage of 0.5x ND/EBITDA. It also says that it expects a working capital release of SEK 7m during H2, having tied up the same amount in conjunction with the replacement of a major raw materials supplier.
Ths share is trading at 7.6x '26e EV/EBITA
Using yesterday's closing price and unrevised estimates, Embellence Group is trading at 7.6x-6.3x our '26e-'27e EV/EBITA vs a historical trading range of 7x-8x NTM. L3M, the share has returned +1%. The Q4 report alone moves our '25e EBITA by +1%.