Oriola - Growth in place, profitability next
Oriola saw solid growth in Q2, and we anticipate a continued good growth pace in Q3. We expect the weaker profitability in the Wholesale-business to improve gradually during the second half of the year, enabling y/y group level improvement.
Two-fold but mostly solid development in Q2
Oriola reports its Q3 results on October 30th. In Q2, Oriola posted solid growth figures both on net sales and invoicing, but up around 12% y/y. Profitability development on group level was more modest, with the adj. EBITDA-margin slightly below previous year levels. Segment level profitability development was two-fold. The Distribution-segment saw the adj. EBITDA improve by 35% y/y through both volumes and margins. The Wholesale-segment on the other hand saw profitability decline clearly, despite solid growth, due to growth related costs and an unfavourable product mix. The profitability of Kronans Apotek was weak and back in the red.
Expecting solid growth and profitability improvement
We except the double-digit growth seen in Q2 to continue in Q3, with our net sales estimate at EUR 474.9m (+11.9% y/y). We anticipate improvements in profitability through the continued volume growth and stabilization of OPEX. The profitability in the Wholesale-segment should start to gradually improve from the weak levels in Q2, but the sales mix could still keep margins fairly low while the growth kicks in. The Distribution-segment is aided by the impact of the on-boarding of new customers during the year, with volume growth expected to drive continued absolute profitability improvements. We remain cautious in terms of relative profitability improvements in the segment, although upside potential is still in place through the underlying efficiency of operations should customer retention and growth remain good. Oriola expects the adjusted EBITDA in 2025 to increase from the previous year, with H1/25 figures on par with the previous year level. We expect Distribution to improve clearly y/y in H2, while expecting Wholesale profitability to improve gradually towards the end of the year but remain below previous year levels.
ACCUMULATE rating with TP or EUR 1.2
We have not made adjustments to our estimates ahead of Q3 and retain our target price of EUR 1.2. From a valuation upside perspective, development of Kronans Apotek and the pace of margin recovery in the Wholesale-business are of interest.