• Conditions remain stable but unfavourable
• We cut '25e-'26e sales by 9-8% due to the divestment
• '25e-'26e EV/EBIT 18x-9x

What to expect in Q4'24

We anticipate Q4'24 sales of SEK 419m and EBIT of SEK -2m, down from our previous estimates of SEK 447m and SEK 4m, respectively. The estimate cuts are based on continually weak consumer sentiment and peers such as Dustin showing soft momentum. Conditions are challenging for both Aurdel and Efuel, as both are facing a less spending-prone consumer, but comps are getting increasingly easy, and we get the impression that demand exists for Aurdel's branded products. Hence, the recent divestment proceeds should be value-accretive. We expect operating cash flow of SEK 3m with working capital releases of SEK 9m.

Estimate changes

We cut '25e-'26e sales by 9-8%, primarily due to the divestment of Deltaco Baltic. Adjusting for the divestment, we only cut '25e-'26e sales estimates by 2-1%, which is due to continued weak consumer sentiment. We assume that the divestment should yield a slight gross margin improvement. Therefore, we only cut EBIT by 7% for '25e-'26e. It is likely that the positive gross margin trend continues because of a better mix, driven by a lower share of external brands. We therefore see a path to a ~3% EBIT margin by '26e — a level last achieved in '21. As DistIT is allowed to keep one-third of the proceeds from divestments, it is likely to re-invest that capital in working capital in order to grow organically sometime in '25e. Interestingly, DistIT has so far generated divestment proceeds of SEK 55m from its last three divestments, of which SEK 15m are reinvested into the business following the bond terms & conditions amendments. We would expect that this much-needed capital could help DistIT generate organic growth in 2025.

Implied valuation

Based on our revised estimates, the company is trading at '25e-'26e EV/EBIT of 18x-9x.