• Geographical diversity gives resilience - UK grew 6% org.
• Thebalux delivered a strong 25% margin; first full quarter in the group
• Share trading at 7x '24e EBITA vs historical avg. 7-11x NTM

Key takeaways from Q1

Markets remain soft across Europe, and the Nordics is still the softest region. Smaller brands Macro Design and Cassoe have recovered earlier than the namesake Svedbergs brand, declining by 3% and 1%, respectively, vs the latter at -22% organic growth y-o-y. Roper Rhodes continues to perform well, growing 6% organically in a soft market. Net sales in Q1 was SEK 572. Price hikes in Roper Rhodes lifted gross margins materially, group gross margins were +320bp y-o-y, and EBITA margins were consequently +160bp y-o-y. EBITA of SEK 84m corresponds to y-o-y growth of 31%. The rights issue to fund Thebalux reduced leverage to a healthy 2x ND/EBITDA.

Thebalux is off to a good start

Q1 is the first full quarter with Thebalux. We view the strong reported contribution with an EBITA margin of 25% as a positive signal, and continue to expect the acquisition to be accretive to margins. Svedbergs Group's 15% EBITA margin target thus looks within reach for '24e, contingent on stable or improving markets. With easy comps and some positive housing market indications in Swedish build starts and house transactions, H2 could look better for the Nordic subsidiaries, in our view. This is especially relevant for the Svedbergs brand, for which larger projects (newbuilds etc.) make up 30-40% of revenues. We raise '24e-'26e EBITA by 4-2% on the strong Q1 momentum.

Trading in the lower end of historical 7-11x EV/EBITA

The share is trading at 8x-7x '24e-'25e EV/EBITA. After making positive estimate revisions (4-2% for '24e-'25e), we raise our fair value range to SEK 37-53 (36-52) corresponding to 7x-9.5x '24e EV/EBITA, compared to a 10y one-standard deviation span of 7-11x NTM EV/EBITA (in the lower end of the historical trading range to account for the uncertain outlook and interest climate).