Relais Q1'25: Steering wheel steadied, engine runs smoothly

Translation: Original published in Finnish on 5/14/2025 at 8:30 am EEST.

Relais' Q1 figures were largely in line with our expectations in terms of operational development, and thus the positive forecast revisions for the coming years were not significant. The valuation of the share is moderate, which is why we reiterate our Accumulate recommendation and EUR 17.0 target price. The company's track record in value creation by allocating capital has been quite good in recent years, and in our opinion, the company has good prospects for continuing its successful strategy execution in the future.

Operational Q1 figures largely in line with our expectations

Relais' Q1 revenue was at the comparison period level at slightly below 83 MEUR, which was well in line with our forecast of just under 1% growth. Organically, revenue decreased both in the Commercial Vehicle Repair and Maintenance business and in Technical Wholesale and Products. For the latter, the what could even be called a clear decline in revenue was quite in line with our forecast, as it faced tough comparables from Q1'24, which was boosted by an exceptionally cold winter. This was offset by acquisitions, which also delivered growth well in line with our forecast. Q1 EBITA reached 9.0 MEUR, slightly exceeding our forecast. The operating result fell short of the challenging comparison period less than we had anticipated, reflecting better-than-expected Q1 profitability. This, in turn, was due to a higher-than-expected gross margin, which was supported by changes in the revenue mix, as the relative share of the Commercial Vehicle Repair and Maintenance business in revenue increased significantly year-on-year. At the bottom of the P&L, net financing expenses were significantly lower than we had expected. This is due to changes in the value of intra-group loans, which fluctuate with changes in the Swedish krona exchange rate, but these are non-cash flow related changes. As a result, Q1 adjusted earnings per share still came in clearly higher than our forecast.

Inorganic growth likely to continue

Relais does not typically provide short-term guidance, but its financial target is to achieve a pro forma comparable EBITA of 50 MEUR by the end of the year (2024: 36.8 MEUR). With our 2026 forecast fully taking into account the recent acquisitions, we expect the company to reach an EBITA of almost 45 MEUR, so achieving the financial target requires faster earnings growth from the company than we expect. In our view, achieving the target still requires acquisitions in the remainder of the year. The company's current debt financing structure still leaves room for further acquisitions, so we expect the company to continue its inorganic growth in the near future. However, the return achieved on capital allocation is more important than absolute earnings growth, but we are confident about this, considering Relais' M&A deals in recent years and the evidence of the development of the acquired businesses.

The value is moderate on several indicators

We have made minor operational forecast revisions for the next few years (1-5%) after the Q1 report. Based on our estimates, Relais' adjusted P/E ratios for 2025-2026 are 11x and 10x, while the corresponding EV/EBITA ratios, which take into account the balance sheet structure, are 12x and 9x. In absolute terms, we consider these valuation multiples to be moderate, and Relais' fairly stable business and thus lower-than-average risk profile justify a higher valuation in absolute terms. This moderate valuation picture is also supported by relative valuation, as the stock is priced at a discount to its key peer groups. Our cash flow model, which is also significantly above the current share price, supports our view of the stock's moderate pricing.