Redeye updates on Northbaze following its Q2 results, which were stronger than expected in both sales and profitability. Sales increased by 17% year-over-year, with an EBITDA margin of 15%. In 2025E, we project Northbaze will reach sales of SEK186m and EBITDA of SEK19m. Based on these estimates, the implied EV/Sales multiple for 2025 is 0.3x, with an EV/EBITDA multiple of 3x.

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Northbaze

* Northbaze operates in highly competitive markets with numerous players, particularly in mobile accessories and refurbished electronics, making it difficult to establish a dominant market position.
* The company's revenue is relatively concentrated within specific product categories and regions, particularly the Nordic market, limiting diversification and increasing vulnerability to market-specific risks.
* Northbaze has not demonstrated consistent returns on invested capital exceeding the cost of capital, indicating challenges in maintaining sustainable profitability.
* The company's competitive advantages, such as product innovation and sustainability focus, may not be sufficiently robust to ensure a lasting moat over decades in dynamic markets.

* Northbaze operates in markets benefiting from secular trends such as sustainability, e-commerce growth, and increased demand for refurbished electronics, supporting long-term growth potential.
* The company has an asset-light model, leveraging centralized production and strategic partnerships to scale operations efficiently without significant reinvestment.
* Northbaze demonstrates a strong commitment to sustainability, focusing on environmentally friendly products and practices, which contributes positively to its brand image and market positioning.
* The company collaborates closely with B2B partners and customers to develop tailored solutions, showcasing customer-driven innovation and adaptability.

* Weak historical growth, with stock price, revenue, and earnings growth falling below desired thresholds.
* Inconsistent earnings quality, with issues in inventory management and operating cash flow conversion.
* Lack of dividend power, with no current dividend payments or history of consistent dividend growth.
* Potential financial instability, as indicated by negative answers to multiple profitability and growth questions.

* Strong short-term liquidity with current assets 1.5 times greater than current liabilities, indicating robust working capital management.
* Healthy debt management, with Net Debt less than two times Operating Cash Flow and five times Free Cash Flow.
* Solid interest coverage ratio, with earnings (EBIT) covering interest on debt more than five times.
* Low financial leverage, as evidenced by a Debt to Equity ratio below 40%.
* Efficient accounts receivable management, with accounts receivable to sales below 20% and its 5-year average.

* Lack of consistent high returns on invested capital, with profitability still under development despite recent strategic initiatives.
* No established track record of dividend payouts, reflecting focus on reinvesting earnings rather than providing immediate shareholder returns.
* Limited evidence of sustainability-related performance metrics tied to executive compensation, potentially undermining focus on ESG goals.
* Insufficient information on gender diversity efforts in leadership, suggesting potential missed opportunities in leveraging diverse perspectives.

* Strong leadership with clear strategic vision, demonstrated by successful diversification through acquisitions and focus on sustainable growth.
* Commitment to innovation evident in diversified product portfolio and strategic acquisitions, positioning the company in growing markets like refurbished electronics.
* Transparent and consistent communication, focusing on long-term value creation through regular updates on strategic priorities and market developments.
* Balanced executive compensation structure without excessive perks, aligning management interests with shareholder value.
* Board composition aligns well with business strategy, demonstrating understanding of value creation process and industry expertise.

SEKm	2023	2024e	2025e	2026e
Revenues	127.3	173.5	186.3	201.7
Revenue Growth	-23.3%	36.3%	7.4%	8.3%
EBITDA	3.0	12.1	18.6	20.2
EBITDA Margin	2.3%	7.0%	10.0%	10.0%
Net Income	-31.6	-0.34	4.5	10.0
EV/Sales	0.7	0.4	0.3	0.2
EV/EBITDA	28.6	5.7	2.9	2.0

Beat on both sales profitability.

Copter & Adiantes back on track, now focus is on Lowwi

Reiterating our valuation range, Base case SEK0.65 (0.65)

Key financials

Q2 2024