Total sales was slightly below our forecast of SEK231m and amounted to SEK225m (209), corresponding to 7% growth y/y. The organic growth was -1.4% y/y, implying a flat organic growth adjusted for the number of working days. EBIT was SEK22.3m, corresponding to an EBIT margin of 9.9% (12.1). Adjusted EBIT (adjusted for SEK2.4m in M&A costs) was SEK24.7m, corresponding to an adjusted EBIT margin of 11.0%. Our forecast was SEK23.1m and 10.0%. Once again, regarding organic growth and margins, CombinedX is among the better performers, strengthening its position as a high-quality company in the sector.

CombinedX sees that the mixed market continued, with soft demand for system development – where overcapacity and pricing pressure are hurting – while security-related offerings are in high demand. The market for ERP systems is somewhere in between. These statements align with what we have seen from other IT consulting firms. Management points out that the market is favourable to the customers (in contrast to a few years ago, where it was favourable to the employees), meaning that having the right offering and focusing on growth pockets are more important than usual. In addition, management states that traditional sales initiatives might be a more attractive option in the “customers’ market” environment. Overall, CombinedX expects the current market conditions to remain throughout 2024.

We leave our underlying Base Case unchanged, but following the SEK2 per share in dividend, we reduce our Base Case to SEK65 (67). CombinedX trades at a significant discount (30-40% on EV/EBIT 2024-2025) to the peer average and median. While the company has a shorter track record, which should motivate some discount, given our positive outlook on CombinedX operations and its strengthening track record, we believe the gap will narrow.