Equity research, Zinzino Q1 2025: Profit growth picks up amid further expansion

To read the full update (pdf), click below:

Profit growth was better than expected in Q1 2025, which bodes well for improved operating leverage in 2025. At the same time, Zinzino adds new markets and bolt-on acquisitions, which further underpin the growth prospects. We raise our estimates and valuation.  

Strong growth looks set to continue

Total revenue in Q1 2025 increased by 59% to SEK 724m, in line with the preliminary sales figures communicated on 3 April. Strong development in core regions contributed to the accelerated growth. The Zurvita acquisition further boosted sales by SEK 52m, or 11 per cent, already in Q1, slightly more (and earlier) than we had anticipated. Unsurprisingly, Zinzino sticks to its previous financial target (at least 20 per cent growth on average) and sees itself exceeding this goal in 2025. We note that total sales in April rose by 54 per cent, roughly in line with our assumptions. During Q2 2025, Zinzino has also communicated the expansion to New Zealand and China as new markets.

Scalability comes into play

Profit growth was solid, and operating earnings (EBITDA) increased more than anticipated at +53 per cent. We believe this is a promising sign of scalability coming into play despite a flat EBITDA margin of 10.9 (11.3) per cent. This is illustrated by lower OPEX than our forecast. The gross margin, however, dropped more than expected to 30.9 (35.4) per cent, partly related to the strong top-line growth as renumeration costs and bonuses increased. On the plus side, Zinzino does not seem overly concerned about the impact of tariffs on its US operations. However, we remain cautious about the gross margin for the full year and expect a decline partly due to Zinzino’s strong focus on expansion.

Accelerated growth motivates premium valuation

Based on recent acquisitions and expansion into new markets, we raise our sales and earnings expectations by about five per cent on average for 2025E-2027E. We now assume that Zinzino will achieve its financial targets of at least 20% growth over the next three years and an EBITDA margin of 10% minimum without further acquisitions.

Further, we have lowered the discount rate to reflect improved conversion of sales increases into earnings growth and a lower size premium.  Strong historical growth, as well as growth prospects and a high share of subscription-based revenue, justify a premium. At the same time, our valuation is somewhat hampered by the lower valuation multiples of the peer group.

Disclaimer

Carlsquare AB, www.carlsquare.se, hereinafter referred to as Carlsquare, conducts business with regard to Corporate Finance and Equity Research in which areas it, among other things, publishes information about companies including analyses. The information has been compiled from sources that Carlsquare considers to be reliable. However, Carlsquare cannot guarantee the accuracy of the information. Nothing written in the analysis should be regarded as a recommendation or invitation to invest in any financial instrument, option or the like. Opinions and conclusions expressed in the analysis are intended only for the recipient.

The content may not be copied, reproduced or distributed to another person without the written approval of Carlsquare. Carlsquare shall not be held responsible for any direct or indirect damage caused by decisions made on the basis of information contained in this analysis. Investments in financial instruments provide opportunities for value increases and profits. All such investments are also subject to risks. Risks vary between different types of financial instruments and combinations of these. Historical returns should not be considered as an indication of future returns.

The analysis is not directed to US persons (as defined in Regulation S of the United States Securities Act and interpreted in the United States Investment Company Act 1940) nor may it be disseminated to such persons. The analysis is also not directed to such natural and legal persons where the distribution of the analysis to such persons would result in or entail a risk of a violation of Swedish or foreign law or constitution.

The analysis is a so-called Commissioned Research Report where the analysed company has signed an agreement with Carlsquare for analysis coverage. The analyses are published on an ongoing basis during the contract period and for a usual fixed remuneration.

Carlsquare may or may not have a financial interest in the subject of this analysis. Carlsquare values the assurance of objectivity and independence and has established procedures for managing conflicts of interest for this purpose.

The analyst Niklas Elmhammer and Markus Augustsson does not own and is not allowed to own shares in the company analysed.