* Soft sales mostly on FX and order timing
* We cut '26e-'27e adj. EBIT by 6-4%
* Trading at ~7x EV/EBIT on our NTM estimates
Bad timing and tough FX
Nilörn's Q1 was soft on the surface, but material FX headwinds (-9%) and a SEK 16m order slipping from Q1 into Q2e explain most of the shortfall. Strip those out and the underlying business was roughly flat y-o-y, which is more palatable given the environment. While we anticipated a tough FX backdrop, the negative organic growth came as a surprise (sales 8% below ABGSCe). Due to Nilörn's highly scalable business model, the sales miss trickled down to adj. EBT, which came in 16% below expectations. The standout positive was the gross margin at 48.4%, well ahead of expectations (ABGSCe 44.6%), driven by solid sourcing execution. However, we do not fully extrapolate the GM as sales currently have a lower than usual share of low-margin packaging sales.
Recovery is pending, but not imminent
The order intake was SEK 218m (-18% y-o-y, o/w -10% lccy), and while this was lower than expected, management mentioned a growing pipeline ahead and confirmed that no clients have been lost. This was described as a "time lag" and a general market trend rather than client-specific deterioration. A cost-saving/reallocation programme is underway, which will reduce spend in some areas while increasing it in others. Moreover, Nilörn had previously expected a summer normalisation in the luxury segment, but the CEO was a bit more cautious in the Q1 Q&A, stating he now sees recovery more likely towards autumn.
Implied valuation
We cut '26e-'28e adj. EBIT by 6-4%, mostly on a mechanical impact but also to reflect a cautious view on the market conditions. We expect Nilörn to reach a 10% adj. EBIT margin by '27e, partly supported by the new factory in Bangladesh. Our updated estimates imply that Nilörn is trading at an NTM EV/EBIT of ~7x, which is ~17% below the company's five-year median.