Gaming Demand And PC Replacement Cycle Will Drive A Powerful Nordic Tech Recovery

Catalysts

About Komplett

Komplett is a Nordic online focused retailer and distributor of technology products and gaming equipment serving both consumers and businesses.

What are the underlying business or industry changes driving this perspective?

• Strengthening demand in core gaming categories, fueled by recent and upcoming high profile product launches that naturally fit into peak season gifting, should support sustained double digit growth in higher margin tech hardware and drive further expansion in group gross profit and EBIT.
• Gradual recovery in Nordic consumer spending combined with an aging PC installed base and the need to upgrade to Windows 11 is set to trigger a multiyear replacement cycle, underpinning recurring B2C and B2B hardware revenues and lifting earnings visibility.
• Completed consolidation of warehouses, back office and shared functions across Webhallen and NetOnNet, together with ongoing cost programs targeting 8 to 10 percent of the cost base, positions Komplett for structurally lower operating expenses and improving net margins as volumes grow.
• Rebalanced price and campaign strategy in Sweden, with a focus on everyday low prices and mix shift toward higher value segments, is expected to translate normalized competition into structurally higher gross margins and more resilient segment level EBIT.
• Disciplined inventory reduction, improved supplier payment terms and solid liquidity of roughly NOK 1.2 billion provide ample capacity to fund IT investments and commercial initiatives, enabling scalable revenue growth while reducing leverage and supporting stronger earnings over time.

Assumptions

This narrative explores a more optimistic perspective on Komplett compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts. How have these above catalysts been quantified?

• The bullish analysts are assuming Komplett's revenue will grow by 8.6% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from -1.1% today to 2.5% in 3 years time.
• The bullish analysts expect earnings to reach NOK 480.4 million (and earnings per share of NOK 2.74) by about December 2028, up from NOK -174.0 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as NOK344.6 million.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 7.6x on those 2028 earnings, up from -12.0x today. This future PE is lower than the current PE for the NO Specialty Retail industry at 18.3x.
• The bullish 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 9.23%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• The B2C and B2B upturn is heavily tied to gaming launches, peak season demand and an emerging PC replacement cycle. If consumer sentiment in Norway and Sweden remains subdued or weakens again, or the expected Windows 11 driven upgrade wave arrives later and smaller than hoped, revenue growth could stall and limit the forecast improvement in earnings and gross profit.
• Management is leaning on large cost and consolidation programs targeting 8 to 10 percent of the cost base. However, ongoing cost overruns in consolidation, rising personnel expenses, and structural inflation in salaries and operating costs in the Nordics may erode the planned efficiency gains, capping net margin expansion and delaying the move to sustainably positive EBIT.
• The distribution and telecom exposed operations are already experiencing contract timing issues, weaker large customer volumes, and a deliberate shift away from low margin volume in Sweden. If this segment fails to recover or loses further ground to competitors, the group could face structurally lower sales and mixed pressure on both revenue and overall gross margin quality.
• Komplett continues to operate in a highly competitive Nordic tech retail market, with a history of intense price pressure in Sweden and historically weaker sourcing power than larger peers. If pricing normalisation reverses or rivals regain aggressiveness, the company may be forced back toward heavy campaigning and discounting that squeeze gross margins and EBIT.
• The improvement in leverage and liquidity is partly dependent on continued inventory reductions, supplier term harmonisation and positive cash flow from operations. If availability issues reappear, working capital swings turn negative, or the company needs to reinvest more heavily in IT, stores and marketing than planned, net debt and interest costs could rise, constraining future earnings and dampening valuation upside.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The assumed bullish price target for Komplett is NOK16.0, which represents up to two standard deviations above the consensus price target of NOK14.33. This valuation is based on what can be assumed as the expectations of Komplett's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of NOK16.0, and the most bearish reporting a price target of just NOK11.0.
  
• In order for you to agree with the more bullish analyst cohort, you'd need to believe that by 2028, revenues will be NOK19.4 billion, earnings will come to NOK480.4 million, and it would be trading on a PE ratio of 7.6x, assuming you use a discount rate of 9.2%.
  
• Given the current share price of NOK11.95, the analyst price target of NOK16.0 is 25.3% 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.