Duell - Another bump in the turnaround story

Market development has continued weak

Duell’s net sales increased year-on-year in the first half, primarily supported by strong growth in Central Europe. In contrast, sales in the Nordics saw a modest decline, as milder winter conditions negatively affected snowmobile category sales. The more important H2 of the company’s FY is driven by summer categories like onroad and offroad motorcycle, bicycle, and marine products. The market environment has become more challenging during the Q3 which has resulted in weaker-than-expected performance during the company’s seasonally important quarter. The market weakness can be seen in new motorcycle registrations in the company’s key markets, although the recent new registrations have been likely affected by regulatory timing issues. In addition, we expect that the latter part of the company’s Q3 (which is more directly affected by day-to-day sales) has been particularly weak as the sale of motor vehicle parts and accessories in Finland dipped notably in May.

Lowering our estimates across the board

With the profit warning, the company now expects FY 2025 organic net sales with comparable currencies to be at the same level or lower as the previous year (prev. at the same level or higher) and adj. EBITA to be below last year’s level (prev. to improve from last year). We have updated our estimates to match the new guidance as we now expect net sales of EUR 123.3m (prev. EUR 130.0m) and adj. EBITA of EUR 5.5m (EUR 7.3m) for FY 2025. Growth in Europe should continue, driven by Central European e-commerce, but weaker demand in some countries has led us to lower our overall growth expectations for the region. In the Nordics, we now expect continued sales decline despite weaker comparison period H2/24. We have also lowered our estimates for the coming years. Duell’s covenants for loans are tied to leverage (net debt to EBITDA) and gearing (net debt to equity). With the updated estimates, we now model net debt to adj. EBITDA near 3.0x for the end of FY 2025.

Short-term risks elevated

After the estimate adjustments, we revise our TP to EUR 5.3 (prev. EUR 8.0) and rating to ACCUMULATE (prev. BUY). Duell is priced at adj. EV/EBITA of 8-6x and P/E of 9-6x on our estimates for 2025-2026E. Valuation remains modest, especially for the coming years. However, weakened market conditions increase short-term risks, as our year-end leverage estimate is at the upper end of the company’s previous, now cancelled, medium-term financial targets.