Equity research Candles Scandinavia, Q3 2025/26: Solid growth, synergies underpin 2026 outlook

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Candles Scandinavia demonstrated strong sales development in Q2 2025/26, boosted by the HashtagYou acquisition and continued double-digit organic growth. We are encouraged by the solid sales in both the Private Label and D2C businesses, while the integration project hampers margins in the short term. We adjust our EBITDA estimates to account for higher costs and slightly trim the base case valuation. However, the current share price does not reflect our outlook for double-digit growth and profitability in the medium term. 

Solid growth momentum further boosted by the HashtagYou acquisition

Candles Scandinavia’s net sales in Q2 2025/26 increased by 143 per cent to SEK 148m (61), boosted by the acquisition of HashtagYou. Our estimate for the quarter was net revenues of SEK 147m. We calculate that the outcome implies solid underlying organic growth of ~21 per cent in the quarter (~25 per cent for the six-month period), demonstrating a continuation of the volume pickup seen in 2025. The company does not elaborate on its sales outlook but notes that the order book is growing from new and existing customers. We have assumed a lower but continued double-digit underlying growth in 2026, as the completed capacity increase is expected to help attract customer volumes.

Profitability is lagging, but a gradual increase in margins is likely in 2026

EBITDA decreased to SEK 8.4m (11), corresponding to a margin of 5.7%. Our estimate was SEK 15.5m, equivalent to a margin of 10.5%. The main deviation from our estimate is higher costs. Although Candles does not break out individual cost items every quarter, we infer that expenses related to the integration project were initially elevated. Additionally, the full impact of the 25 FTE staff reduction in manufacturing, announced earlier in the year, is not yet visible. Candles plans to transfer a significant part of production from HashtagYou’s external suppliers to its own Örebro facility in the first half of 2026. It reiterates the target of SEK 40-45 million in profit improvement after the completion of integration. Candles has a strong focus on executing synergies and expects a marked increase in profitability in 2026, with a tilt toward the second half of the year, driven by higher margins, increased production capacity, and an international portfolio of both brands and customers.

Outlook supports a higher valuation in our view

We adjust our expectations to reflect a somewhat more drawn-out increase in the EBITDA margin over 2025-2027 due to initially higher OPEX during the integration than we had assumed. We are reducing our estimates by some eight per cent. Additionally, a higher D&A than in our previous calculations further negatively affects our EBIT and EPS forecasts. In conclusion, we lower the base case valuation by approximately ten per cent. However, the case for solid growth combined with significant improvement in profitability in the medium term remains. This contrasts with the low valuation multiple of EV/sales NTM at 0.7x, compared to 1.3x for peers.

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