• Organic growth of 9% vs. cons. 9.5%
• Adj. EBITA SEK 141m, 3% below consensus
• Gross margin gains offset by capacity and marketing investments

Q2'24 outcome

The Q2 report was broadly in line with expectations and there were no major surprises. Q2 sales came in at SEK 1,861m (-1% vs ABGSCe 1,874m, -1% vs cons 1,881m), organic growth 9.0% (vs 9.5% ABGSCe; vs 9.5% cons) gross margin at 31.5% (vs ABGSCe 30.6%, vs cons 31.0%) and adj. EBITA at 141m (-1% vs ABGSCe 143m, -3% vs cons 145m). As expected, the company tied up working capital in order to grow during the quarter, but this tie-up is poised to be reversed during the later half of 2024.

Thoughts and outlook

Organic growth was in line with expectations and is likely increasingly volume-driven as pricing-related tailwinds are abating. Humble's gross margin is improving, despite challenging freight conditions. This improvement is likely due to fixed rate freight contracts into which the company has entered at below current market rates. Even though the company's gross margin has recovered by 220bps y-o-y, it has not translated into a full EBITA margin improvement due to marketing investments and capacity-increasing spend. From a long-term perspective, this is not an issue because compounding through higher growth rates is generally preferable to short-term margin optimisation. Our opinion on the business remains unchanged as additional capital allocation opportunities open up.

We expect marginally negative consensus estimate revisions

The share is down ~12% YTD and is trading at ~10x '24e EV/EBITA on our unrevised estimates. Mechanically, consensus EBITA estimates should come down by 1-2%.