• FY'24 org. growth outlook downgraded...
• ...now expecting 5-10% org. growth (12-15%), and EBIT margin of 7.5-10%
• Mid-point implies an EBIT ~10% below our current '24e

Market delays weighing on growth

Careium has downgraded its full-year growth outlook, going from expecting 12-15% organic growth previously, to now expect 5-10%. While the EBIT outlook of “increased EBIT” remains, Careium now expects a margin of 7.5-10% for the full year (ABGSCe 9.1% pre press release). Like we have discussed in previous reports, the UK's announcement in March of a two-year delay of the close-down of analogue telecommunications and Telia's delay of its close-down of 2G networks in Sweden is weighing on growth, and they were the main explaining factor to the downgrade according to the press release. We note that these are temporary in nature, assuming that the structural demand remains, so the delays could support future growth instead. However, there is no outlook for 2025 and onwards released, and as Careium expands its FY growth target range by 2pp with only 3.5 months left of the year, the short-term uncertainty is notable.

'24e EBIT mechanically down 9% on mid-point outlook

Our current organic sales growth estimate for the full year of 2024 is 12%. Given the range of the new outlook, a mechanical cut to our estimates of 5pp (i.e., arriving at the mid-point of the outlook), and assuming a margin in the mid-range of the outlook of 8.75% implies an EBIT that is 9% below our current estimates. While the mid-points implies a cut to our estimates, even the lowest range of the EBIT margin outlook implies an EBIT growth of 12% for the full year.

Q3 and Q4 expectations

Careium anticipates negative organic growth for Q3 where our current estimates for Q3'24 is 9%, with Q4 sales growth increasing significantly to 27%. Q3'23 was a strong quarter, with 18% org. growth y-o-y, while Q4'23 presents very easy comps, as org. growth was flat, so the company expects significant growth in Q4.