Duell - Expecting continued good progress

First half of the fiscal year showed promising signs
Duell’s net sales increased 7.5% to EUR 55.2m in H1 driven by inorganic growth as organic sales with comparable currencies decreased 0.8% y/y. While organic growth was slow for the first half, the company already grew organically in Q2/24 driven especially by good execution in the European market despite the off-season. With the stronger than expected growth, adj. EBITA came in at EUR 1.4m for Q2, above our estimate of EUR 0.8m, for the H1, adj. EBITA was at EUR 1.6m (EUR 0.6m H1/23).

Expecting slight growth for Q3 driven by rest of Europe
Our estimates remain unchanged ahead of the Q3 business review. We expect 3% y/y growth with net sales of EUR 38.8m and adj. EBITA of 3.9m (EUR 3.8m Q3/23). We expect the Nordic market to have remained tough during the third quarter. Registration of onroad motorcycles paint two-sided picture with new registrations down in Finland for the first five months of 2024 while in Sweden the registrations have increased. Indicating a still weaker market in the Nordics is the lower search traffic for the leading Nordic powersports aftermarket webstores. On the other hand, we expect that the dealer inventory reductions have slowed down as many dealers operate with already low inventory levels. We expect no changes in the European market as we estimate continued organic growth in Central European key geographies. On the cost side, we see some gross margin pressure due to ongoing issues in the Red Sea increasing freight rates starting from end of 2023.

BUY with a TP of EUR 0.04
Despite the share price rally since our rating upgrade ahead of the H1/24 report, Duell’s valuation remains undemanding for the coming years. Duell trades at 7-5x adj. EV/EBITA and 12-6x adj. P/E for 24-25E, with a substantial discount compared to the European peer group. We retain our rating at BUY with a TP of EUR 0.04.