Digital Distribution And Automation Will Drive Nordic Renovations

Key Takeaways

• Digital investments and the acquisition of Celebert position TCM to capture online growth, improve margins, and enhance customer engagement in home renovations.
  
• Automation, sustainability focus, and favorable demographic trends support margin resilience, premium pricing, and a long-term path for revenue expansion.
  
• Heavy dependence on the Danish market, slowing demand, margin pressures, and execution risks from digital and acquisition activities threaten growth, profitability, and revenue stability.

Catalysts

Manufactures and sells kitchen and furniture products for bathrooms and storage in Denmark, Norway, and internationally.

• The upcoming full acquisition of Celebert is expected to enhance TCM Group's digital distribution capabilities, tapping into the accelerating consumer shift toward online research and purchase of kitchens and related products-supporting revenue growth and possibly improving operating leverage, which could boost both top-line and net margins.
  
• Ongoing investments in digitalization, including a new ERP platform and expansion of online brands, position TCM to capitalize on growing consumer demand for customizable, design-oriented home renovation solutions, driving increased customer engagement and long-term revenue growth.
  
• TCM Group's completed lacquering facility and the broader focus on automation are expected to deliver further operational efficiency, supporting steady gross margin improvement as scale and process optimization offset potential input cost volatility-positively impacting earnings resilience.
  
• Strong, sustained demand for home renovations driven by demographic trends (an aging population and ongoing urbanization in the Nordics) continues to increase TCM's addressable market, supporting a multi-year runway for revenue expansion and higher average selling prices.
  
• Rising consumer preference for sustainable and premium-quality home products aligns with TCM Group's strategic focus on environmentally conscious manufacturing and product offerings, enabling potential premium pricing and improved gross margins as sustainability becomes a more significant purchasing driver.

TCM Group Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming TCM Group's revenue will grow by 9.4% annually over the next 3 years.
• Analysts assume that profit margins will increase from 5.4% today to 7.4% in 3 years time.
• Analysts expect earnings to reach DKK 119.6 million (and earnings per share of DKK 10.69) by about August 2028, up from DKK 66.2 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 9.9x on those 2028 earnings, down from 11.5x today. This future PE is lower than the current PE for the DK Consumer Durables industry at 19.3x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.17%, as per the Simply Wall St company report.

TCM Group Future Earnings Per Share Growth

Risks

• Heavy reliance on the Danish market (81% of group revenue) exposes TCM Group to local economic and housing cycles, meaning any downturn in Denmark or declining consumer confidence could sharply impact revenue and earnings stability.
  
• The sustained slowdown in order intake and store traffic, starting earlier in Q2 than normal seasonal trends, points to changing consumer spending habits and potential demand stagnation, which may signal longer-term muted growth or revenue risk.
  
• The positive margin trends in Q2 were driven by higher average selling prices and stable input costs; however, management noted that supplier cost increases will likely feed through in the second half, risking margin compression and impacting net earnings.
  
• The B2B/project segment continues to face headwinds with project orders decreasing and only slight pickup in new builds; if sluggishness persists or the hoped-for recovery in either B2C or B2B does not materialize, the scope for organic revenue expansion will be limited.
  
• Increased capex and SG&A costs related to acquisitions, digitalization (ERP rollout), and integrating new stores/brands pose execution and margin risks; if digital or automation investments fail to deliver expected efficiencies amid input cost volatility, profitability and cash flow could be squeezed.

Valuation

• The analysts have a consensus price target of DKK96.5 for TCM Group based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of DKK107.0, and the most bearish reporting a price target of just DKK86.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be DKK1.6 billion, earnings will come to DKK119.6 million, and it would be trading on a PE ratio of 9.9x, assuming you use a discount rate of 7.2%.
• Given the current share price of DKK72.6, the analyst price target of DKK96.5 is 24.8% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.