Duell - Opportunity amid uncertainty

Still some seasonal slowness before the summer season

The company’s net sales beat our estimates in the seasonally slow Q1 as the growth outside Nordics was even more rapid than expected. Duell’s Q2 is still considered as part of the company’s winter season and therefore the volumes are expected to remain lower when compared to the summer season/H2 of the fiscal year. In addition, we see no immediate improvement in the European powersports aftermarket. Consumer confidence across the Nordics and Europe is still at a low level yet continuing to recover from the lows seen during 2022/2023. Furthermore, based on the comments from market participants, continued weaker demand is expected especially for the beginning of 2024.

Expecting improved market towards the end of the FY

We still expect organic sales to have declined as the company’s end markets remained slow during Q2. Despite the slow market, we have increased our net sales estimate slightly for the quarter as we expect the TranAm acquisition to continue to deliver inorganic growth for Q2. In addition, we expect lower negative effect from FX. We now estimate net sales of EUR 25.9m with 1.6% y/y growth. We predict an adj. EBITA of EUR 0.8m, considering margin pressure from logistics costs, offset by the company's cost-saving actions. For the rest of the FY 2024, we anticipate organic net sales to start growing during the second half of the FY. While we expect growth, we have adjusted our gross margin estimate for H2 slightly downwards.

Valuation has turned attractive, yet uncertainties exist