• '24e-'25e EBITA down 2-3%
• Capacity investments to aid organic growth
• '25e lease adj. FCFE yield excl. earn-outs of ~9%

Takeaways from the report

The Q2 report was in line on organic growth (9% vs. FactSet cons. at 9.5%), but beat once again on the gross margin (31.5% vs. cons. 31.0%). Adj. EBITA was 3% below cons. but in line with ABGSCe. As such, we deem the outcome unsurprising. Comps for organic growth are somewhat challenging both in Q2 and in the coming quarters because Humble no longer enjoys a pricing tailwind. That said, demand for Humble's products appears to exceed its supply, and we are therefore confident that Humble's current marketing efforts are yielding incremental demand increases, but that additional investments in capacity are required.

Estimate changes

Following the Q2 report, we make minor adjustments to our adj. EBITA estimates for '24e-'25e, cutting them by 2-3%. While we marginally raise organic growth estimates, we assume a higher cost base on more marketing spend and capacity-increasing investments. This is necessary to meet the increasing demand from outside the Nordics. With an upcoming change of listing venue, the company could technically open up for an additional capital allocation opportunity such as buybacks, which could be helpful when acquisitions are a relatively less attractive capital allocation option. It is likely that the CMD will shed light on the capital allocation framework within each segment. This could in turn help clarify how investors should perceive the long-term competitive advantages of each segment and their long-term growth and margin potential.

Valuation

Based on our revised estimates, the company is trading at a ~9% '25e lease adj. FCFE yield (excluding earn-out payments). While peers are trading at ~7% for '25e, they are growing earnings at a generally slower rate.