Duell - Seasonal slowness ahead

Completed rights issue reduces the risk level

Duell completed its rights issue (RI) in December as the offering was oversubscribed. We updated the effects of the RI to our estimates in early December as the company had a subscription guarantee undertaking given by Hartwall Capital. As the RI was oversubscribed, the guarantee was not used. After the RI, there are over 1b shares outstanding and net proceeds of EUR 17.7m from the offering. With the net proceeds, Duell’s net debt to adjusted EBITDA ratio drops to roughly 3.7x at the end of 2023 and below 3.0x based on our estimates for 2024E.

Expecting slow Q1 due to seasonality and market dynamics

First quarter is typically the lowest sales quarter and includes large amount of seasonal pre-sales with discounted prices to dealers. The snowmobile and ATV product segments are important during the winter season as most of the segment items are sold during the first half of the fiscal year. We expect that the powersports market has continued to decline during the quarter and that dealers have continued to implement cautious inventory policies. We have made only slight adjustments to our estimates. We expect net sales of EUR 24.5m for Q1/24, down 5% y/y from EUR 25.8m in Q1/23. With the lower volumes, our estimate for adj. EBITA in Q1/24 is only slightly positive at EUR 0.0m (EUR -0.4m Q1/23). We expect a slight improvement in profitability due to Duell’s cost efficiency efforts, although we predict only a modest impact due to projected lower net sales.

HOLD with a TP of EUR 0.04 (EUR 0.03)

We retain our rating at HOLD yet adjust our TP to EUR 0.04 (EUR 0.03). Duell trades at 9.8x and 7.0x on adj. EV/EBITA for 2024E and 2025E. The 2024E multiples are slightly elevated, yet we continue to see the long-term upside potential albeit the visibility to the projected turnaround remains low. The 2025E adj. P/E and EV/EBITA imply a discount of 5-21% relative to our main peer group and DCF indicates an upside of 27%.