Ready for expansion

Lammhult is a furniture company with a strong presence in the Nordic region. After years of focusing on its key markets, the Company is expected to win market shares in other markets by focusing on diversification of its offering. Leveraging their acknowledged brand in the Nordic region, in addition to cost-cutting, the Company is expected to create an attractive opportunity for potential growth in its earnings. Based on a successful market expansion as well as a margin expansion through cost-cutting and scalability, Analyst Group estimates a sales of 1 053.1 MSEK in the year 2023. With a target multiple of EV/S 0.5x, an implied share price of 52.7 SEK is motivated.

• Possibility of acquisitions creates a framework for an attractive future

Lammhult’s portfolio of companies currently consists of 8 companies, with every company having their own niched products. Historically, Lammhult has utilized bolt-on acquisitions to realise synergies between its portfolio companies. Even though every company operates on a decentralised basis, the acquisitions have enabled cross-selling and elimination of duplicate costs, which in turn have enabled Lammhult to achieve cost and revenue synergies. With an ND / EBITDA of 1.6x on an LTM basis, the Company has leeway to acquire another portfolio company and build upon its product offering and stimulate sales growth going forward.

• Expansion to new markets enables future growth

Currently, the Norwegian and Swedish markets are identified as Lammhult’s key markets. Their share is expected to decrease as the Company is looking to leverage its recognized brands in the Nordics to effectively expand its presence into new markets, creating an attractive opportunity for future sales growth.

• Increased focus lead to effectiveness and margin expansions

Since Lammhult’s appointment of their new CEO in 2018, Lammhult has focused on increasing its profitability. This has lead to the divestment of unprofitable business areas as well as a reduction of their fixed cost base and streamlining their business to expand their margins and profitability. This lead to Lammhult achieving its highest EBIT in over seven years in 2019 with an adjusted EBIT margin of 7.7 %.

• Base scenario motivates a share price of 52.7 SEK

In a Base scenario, sales are forecasted to 1053.1 MSEK during the year 2023. The estimated EBIT margin is 8.1 %, resulting in an implied EBIT of 85.6 MSEK. Through the utilization of a relative valuation using a select group of comparable companies, an EV/Sales multiple of 0.5x is motivated. Using forecasted sales for the year 2023, an implied share price of 52.7 SEK is motivated.