Equity research Candles Scandinavia, Q1 2026: A scent of synergies

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The beginning of the year was slower than we had assumed. However, a key message is that the integration work with HashtagYou is running according to plan. We expect quarterly reports showcasing production synergies to be catalysts for the share price in H2 2026.  

Slow season and difficult comparison hamper sales growth in Q1

Candles Scandinavia’s net sales were again boosted by the acquisition of HashtagYou, increasing 98 per cent to SEK 82m (42). The impact from the acquisition was 110 per cent; consequently, the Private Label segment contracted by 12 per cent. Drivers behind the decline are strong comparables and FX headwinds. Hence, the string of growth quarters running from Q2 2024/2025 was broken. In sum, sales were lower than our forecast; however, seasonality is arguably more pronounced in the new structure and following the shift to calendar year reporting. Although comparable financials were not published, Candles says HashtagYou’s revenue increased.

Preparations for production integration are proceeding according to plan

EBITDA declined to SEK -2.3m (0.9), burdened by lower volumes in the Private Label business. While OPEX-to-sales is elevated following the acquisition of HashtagYou, we conclude that costs were still somewhat lower than expected in the quarter. Overall, it is hard to draw firm conclusions from the lower profitability as volumes are seasonally weak. The production relocation of HashtagYou’s range to the company’s own factory in Örebro is the single most strategically important operational event right now. Management says the project is progressing to plan, with the launch of in-house manufactured products expected towards the end of Q2. The profitability impact is expected to start in H2 2026, with full run-rate effects from 2027. The CEO reiterates the outlook that “2026 has every chance of becoming the company’s best year to date, both in terms of profitability and cash flow”. The recently published annual report reveals that margins after raw materials and supply costs improved markedly in 2025, mainly due to the acquisition and the new group structure. This further supports the case for scalability, we believe.

Prospects for significant profitability improvement remain

Following the report, we expect lower sales growth from external Private Label customers in the medium term and accordingly reduce our net sales estimates by an average of 1.5% for 2026-2028E. As a result, we trim our corresponding EBITDA estimates by approx. -5 per cent. Also, cash flow from operations was on the weaker side at SEK -12.5m in the quarter (4.2) and the cash position was SEK 12.1m at the end of Q1 2026, vs SEK 17.6m at the end of December 2025. Due to somewhat lower estimates and increased net debt, we adjust the base-case valuation to SEK 50 (SEK 54) per share. We still argue that the case for solid growth combined with significant improvement in profitability in the medium term remains. This contrasts with the modest EV/sales 2026E multiple of 0.9x, compared to peers’ 1.3x.

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