Embracer: Relatively uneventful Q2, all eyes on H2 - ABG
This is a third party research report and does not necessarily reflect our views or values
Q2 report due on 17 November
We cut our ’21/22e-‘23/24e adj. EBIT by 5.0-2.0%
Fair value SEK 104-158: Trades at 10x ‘22/’23e adj. EBIT
In Q2 ‘21/22e, we factor in sales of SEK 3,096m (-2% vs. cons), corresponding to 29.9% y-o-y growth, whereof -10% organic. Not too much should be read into the negative organic growth in our opinion, since Q2 was a quarter without any major game releases and COVID-19-boosted comps. The main building block for sales in Q2 will be the backlog catalogue as well as a couple of smaller releases from Saber (that have been well received by the community). But looking into H2, this year’s game schedule is very back-end heavy with ~70% of this year’s finalised game development expected to be released in Q4. The most important contributor will be the AAA title Saints Row – its largest release to date – that we expect will be released in Q4.
On our new estimates, the share trades at 10x ‘22/23e EV/adj. EBIT, which corresponds to a ~40% discount to its historical average and a ~20% discount to large global gaming peers. Due to a change of analyst, we have made some changes to the input variables in the SOTP valuation, corresponding to a new range of SEK 104-158 per share.
We cut our ’21/22e-‘23/24e adj. EBIT by 5.0-2.0%
Fair value SEK 104-158: Trades at 10x ‘22/’23e adj. EBIT
In Q2 ‘21/22e, we factor in sales of SEK 3,096m (-2% vs. cons), corresponding to 29.9% y-o-y growth, whereof -10% organic. Not too much should be read into the negative organic growth in our opinion, since Q2 was a quarter without any major game releases and COVID-19-boosted comps. The main building block for sales in Q2 will be the backlog catalogue as well as a couple of smaller releases from Saber (that have been well received by the community). But looking into H2, this year’s game schedule is very back-end heavy with ~70% of this year’s finalised game development expected to be released in Q4. The most important contributor will be the AAA title Saints Row – its largest release to date – that we expect will be released in Q4.
On our new estimates, the share trades at 10x ‘22/23e EV/adj. EBIT, which corresponds to a ~40% discount to its historical average and a ~20% discount to large global gaming peers. Due to a change of analyst, we have made some changes to the input variables in the SOTP valuation, corresponding to a new range of SEK 104-158 per share.