Following Gabriel’s announcement last week to postpone its FY’23/24 financial reporting due to financial reporting challenges in the Group’s Mexican subsidiary, along with new FY’24/25 guidance on its continuing operations, we have revised our estimates lower and now see higher short-term uncertainties until clarifying news is announced, potentially in the beginning of January 2025. Consequently, we lower our recommendation to Reduce (previously Accumulate), and lower our price target to DKK 225. In the short term, the attractiveness of the investment case is dominated by uncertainties and slower market recovery than expected, however, the long-term potential remains when the market turns more favorable and potentially also when more visibility about the FurnMaster carve-out and the Mexican production unit is provided. Growth curve postponed one year We cut our estimates based on Gabriel’s new FY’24/25 guidance and deeper understanding of FurnMaster. The FY’24/25 guidance shows continued growth and margin improvement of the ongoing business (Fabrics and SampleMaster). Our deeper insights into FurnMaster’s share of revenue leads us to forecast the ongoing and discontinuing operations separately, with our growth curve focused on the ongoing operations, while applying a GDP-based growth to FurnMaster, with lower margins, to reflect the current challenges. We also push back our growth curve by one year given a slower recovery in furniture markets, and the FY’24/25 guidance suggesting ongoing weak, but stable markets. Delayed financial reporting may have some negative outcomes As highlighted in our analyst comments from Friday, the initiated review of the financial reporting from the Mexican production unit may have some negative outcomes. Potential outcomes include a postponed sales process of the FurnMaster unit, as the production unit is under the FurnMaster unit in a carve-out process. It may also lead to a lower transaction price than expected, including from possible review-related write downs. Ongoing growth in continuing operations but estimates revised lower Gabriel reported preliminary results for ongoing operations, with revenues of MDKK 483 (6% y/y growth) and EBIT of MDKK 19.7m (4.1% margin, up 1.2 percentage points). This growth occurred despite historic low real estate activity levels in Europe and globally. Group guidance remains at MDKK 880-930 in revenue and EBIT of MDKK 8-15, implying Q4 EBIT of MDKK -4 to -11, versus our estimate of MDKK 2.0. We reduce our forward estimates based on continued challenging market conditions and weaker FurnMaster forecast. Our EBIT estimates our now FY’23/24 MDKK 12.0 (previously MDKK 21.1), FY’24/25 MDKK 22.5 (previously MDKK 50.0) FY’25/26 MDKK 49.6 (previously MDKK 75.7), reflecting a growth curve delay of around one-year. Short-term uncertainties blur the long-term potential We continue to see long-term potential in Gabriel, and a sale of FurnMaster can de-risk the case and strengthen the balance sheet. However, we are now more cautious on the timing of the profitability turnaround, as there are several short-term uncertainties. We have lowered our target price and recommendation due to the downward adjusted estimates and increased risks. We will look for greater information regarding the carve-out process and Mexico situation when Gabriel report their FY’23/24 results now likely in January 2025.

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