* EBITA flat y-o-y despite MD switching costs
* DTC share will be reported next in Q4 2026
* Fair value range of SEK 35-42 reiterated
Pappelina's DTC remains a strong point
Q3'26 net sales were SEK 178m (+3%, +2% organic), in line with ABGSCe. The gross margin was 62.4% (+180bp y-o-y) on DTC mix, but SG&A rose to SEK 92m from SEK 86m in Q3'25 (partly driven by the change of MD in Wall&Decò that came with some added cost, but this cost was not quantified so we can't adjust for it) so EBITA was flat at SEK 24m (13.2% margin, -40bp y-o-y). Pappelina grew well, driven by a "more than" doubling of DTC sales y-o-y in Q3 (+130% y-o-y in Q2, for reference) and Cole & Son's sales decline stabilised (+3% y-o-y), in line with the CEO's plan since the beginning of the year, while Wall&Decò was soft. Management said it expects slower external manufacturing growth ahead to refocus efforts on development for the Group brands.
We trim our '27e EBITA by 2%
We cut '27e EBITA by 2% for '27e, 1pp of which is related to updated FX rates, with the rest from higher opex. We trim our growth forecasts for external manufacturing, but lift our Pappelina growth forecasts further. LTM, Pappelina, the first brand to upgrade its DTC platform, has reported average growth of 17%. Embellence stated during today's report presentation that it would present an updated DTC sales share in the Q4 2026 report. The last time this share was reported, in Q4'25, it was 8%. This is an important benchmark for the strategy.
We reiterate our SEK 35-42 fair value range
We argue that our estimate revisions are offset by rollover effects, so we reiterate our fair value range of SEK 35-42, based on the company's own one standard deviation trading range of 10-12x NTM P/E in the last three years. The share is currently trading at 9.8x '27e, below this range. We estimate FCF yields of 12%/15%, lease-adjusted, on '27e/'28e, and dividend yields of 6.1-6.9% for the same years.