• Q1 report Thursday, 24 April at 12:00 CET
• '25e-'27e EBITA down 3%; 6% CAGR in '24-'27e
• 11-9x EBITA in '25e-'27e, 8-14% FCF yields

The mild winter continued in Q1

We expect another weak quarter as a result of the mild winter and the lack of snow to remove for GLGs companies, in both Sweden and Norway compared to more favourable winter conditions in 2024. In terms of organic growth, we expect -12% (vs. +8% in Q1'24) due to lower sales in both Sweden (-18%) and Norway (-6%). Previously announced M&A adds 10% to our Q1e sales, less 2% headwinds from FX, leading to sales of SEK 1,342m in Q1e, -3% y-o-y. We forecast adj. EBITA of SEK 59m for Q1, -36% y-o-y, for a margin of 4.4% (6.7% in Q1'24). This is due to a ~5% margin in Sweden and ~8% in Norway, while we estimate that the Rest of Europe is at a negative margin of -2%, as the companies in the region have strong seasonality. Finally, recent M&A lifted YE'24 ND/EBITDA to 2.8x, but solid cash flow (40-70% of EBITA in '25e-'27e, X% of net profit) and higher earnings mean that M&A headroom remains into 2025e-2026e.

Estimate changes

We lower '25e-'27e EBITA by 3% due to FX. We now forecast 6% adj. EBITA growth in 2025, which accelerates to 8-5% in 2026e-2027e (6% CAGR in '24-'27e), as margins improve from 8.6% in 2024 to 9.4% in 2027.

Appealing M&A story continues

We believe that GLG should be in a good position to grow organically over time given its exposure to stable markets and high exposure to public customers (~70%), supported by M&A and a positive margin trajectory (currently at ~9% vs. ~5% in '17-'20). In addition, GLG acts in local markets which, together with the large share of public funding, should leave the company fairly insulated from tariff uncertainty. For '24-'27e, we expect GLG to deliver growth, margins, ROCE and FCF in line with peers. The share is currently trading at 11-9x EBITA (12x L5Y) with 8-14% FCF yields.