Equity research, Lohilo Foods: Attractive brands with scaling potential

Lohilo has built a diversified portfolio of brands and products, focusing on functional foods and beverages. Following four consecutive quarters of growth and profitability, the company has successfully completed its turnaround. Given strong sales momentum and new launches, continued growth and margin expansion are expected in 2025. Carlsquare Equity Research initiates coverage with a fair value per share of SEK 2.1 in the base case.

Catering to the market of functional foods and beverages

Lohilo Foods AB (Lohilo or the company) has expanded its portfolio beyond its legacy brand, Alvestaglass, to include a diverse range of brands specialising in functional foods and beverages. Its product range comprises high-protein ice creams and health-oriented items like bars and superfoods. With a focus on product development, innovation, and brand building, Lohilo’s diversified product offering contains elements of uniqueness and is well aligned with current market trends. This creates a solid position in the premium segment in terms of both quality and pricing.

While Sweden remains the company’s primary market, Lohilo has expanded its presence into Finland, the Netherlands, Switzerland, Norway, Denmark, and China. Its omni-channel distribution network comprises 6,500 supermarkets, convenience stores, retailers, and e-commerce platforms, ensuring strong market reach.

Refined strategy bearing fruit, paving the way for growth and profitability

After exceptional growth between 2015 and 2021, the company faced a decline in growth and profitability leading up to 2023. This was mainly due to the discontinuation of key distribution agreements with the ice cream brand Häagen-Dazs. However, Lohilo has successfully executed a turnaround, regained sales momentum, and restored profitability. This has been driven by a refined strategy focused on the company’s own brands, expanded export efforts, and cost-saving initiatives, all of which are now delivering tangible results.

With a strong sales momentum and new product and flavour launches in Q1 2025, we expect net sales of SEK 231m in 2025, corresponding to 12-13% growth. The underlying market is expected to expand at 6-8% annually. With a focus on innovation, an already well-diversified product portfolio with a clear strategic direction and solid growth opportunities, we anticipate that Lohilo will outpace the market with a project a CAGR, 2024–2027 of +10%. Due operational efficiencies and an increasing share of own-brand sales, we expect an improvement in the EBITDA margin to 3.8% in 2025 and 5.1% by 2027. In the short term, swings in commodity prices such as cocoa might hamper margin development.

Scaling opportunity and discount to peers indicate an upside in valuation

We calculate a fair value of SEK 2.1 per share in the base case, corresponding to a potential upside of some 30% in the share. Our estimates correspond to an EV/EBITDA NTM of 7.7x. The full reference group is valued at a median EV/EBITDA NTM of 11.1x.

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