Duell - Onwards in a challenging market
Duell’s Q3 development was two-fold as growth in Europe was stronger than expected while revenue declined in the Nordics more than we estimated. Profitability missed our estimates mainly due to higher-than-expected operating expenses and lower net sales. We continue to anticipate an increase in profitability y/y for Q4 and consequently for the entire FY 2024.
Q3 net sales largely in line while adj. EBITA missed
Duell’s Q3 net sales grew 0.6% y/y to EUR 37.9m missing our estimate slightly (EUR 37.7m in Q3/23, EUR 38.8m Evli). Net sales with comparable FX grew 2.7%. While additional transport costs due to Red Sea shipping challenges and the Finnish strike had a negative effect on the gross margin, the margin improved y/y to 24.9% (24.7% Q3/23). Operating expenses were at a higher level than we expected and adj. EBITA reached EUR 3.2m, missing our estimates (EUR 3.8m in Q3/23, EUR 3.9m Evli).
Profitability should improve year-on-year in Q4
After the actual figures for Q3 and slight adjustments to our estimates, we now model adj. EBITA of EUR 6.1m for FY 24E. We expect y/y profitability improvement for Q4 vs. soft comparison period of Q4/23. Improved profitability is driven mainly by expected revenue growth while we still expect higher logistics costs to hamper the gross margin. For FY 25E, we now model net sales of EUR 130m and adj. EBITA of EUR 8.4m with a margin of 6.5%. We expect that the development of the company’s main markets seen during FY 2024 continues to FY 2025 as we expect further growth from the Rest of Europe while we estimate only a slight recovery in the Nordics.
Valuation remains undemanding going forward
With our updated estimates, Duell is priced at 8-6x adj. EV/EBITA for 2024-2025E, or roughly 25-30% below its main peer group. In addition to the undemanding relative valuation, the company’s current price presents a notable discount to the fair value derived from our DCF analysis. We retain our TP at EUR 0.04 and rating at BUY.