Careium: Back to growth, but soft on earnings - ABG

* Q3 sales 3% below our ests. at SEK 214m, for 9.4% org. growth * Adj. EBIT SEK 19m vs. ABGSCe 22m * Trading at 9x-7x '25e-'26e EV/EBITA adj. Solid growth, EBIT weighed down by financial leases Careium delivered sales of SEK 214m (-3% vs ABGSCe 221m), corresponding to y-o-y organic growth ex. FX of 9.4% (-1.9pp vs ABGSCe 11.3%). Segment wise, service sales was SEK 147m (-11% vs ABGSCe 166m), and product sales was SEK 66m (20% vs ABGSCe 55m). UK & Ireland was the primary growth driver (17%), albeit from light comps (-19% Q3'24). Sales in Sweden were negatively impacted by the accounting of financial leases, which had an effect of SEK 21.9m, leading to negative sales growth in the Nordics of -14.2% y-o-y. Excluding the impact of the classification of financial leases, Careium comments that Nordics net sales would have increased 11%. The gross margin increased to 44.2% (0.1pp vs ABGSCe 44.1%). Opex came in at SEK -80m (7% vs ABGSCe -75m). EBIT amounted to SEK 14m (-36% vs ABGSCe 22m), however, affected by a one-off of SEK 4.6m related to the recent change of CEO. Adj. EBIT was therefore SEK 19m (-15% vs. ABGSCe 22m), for a margin of 8.8% (-1.3pp vs ABGSCe 10.1%), vs. 8.2% Q3'24. Cash flow and outlook FCF in Q3 amounted to SEK 14m, vs. ABGSCe SEK 23m. This is an increase of SEK 10.9m y-o-y. FCF was below our expectations, mainly due to the lower than expected earnings. Capex increased to SEK -20.4m vs -10.3m in Q3'24, as a lower number of contracts were classified as financial leases. We are encouraged by the strong sales in UK and Germany. The new CEO also commented that Careium is poised to participate in market consolidation, but should tread lightly when looking for M&A opportunities. Moreover, the company reiterates its targets for 2025. From Q1'26, the impact of financial lease accounting is expected to be significantly reduced. Valuation and conference call details On our pre-Q3 estimates, the share is trading at 9x-7x ‘25-'26e EV/EBITA adj. The negative mechanical effect for consensus '25e-'26e EBIT should be within a range between low teens to h.s.d. In addition, we expect more details about Q3 on the conference call at 10.30 CET.