New Production Capacity And Efficiency Program Will Drive Long Term Earnings Upside

Catalysts

About Humble Group

Humble Group is a diversified consumer goods platform focused on future snacking, sustainable personal care, quality nutrition and Nordic distribution.

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

• Ramp up of new production capacity at Grahns Konfektyr and the additional bar line in Australia is set to capture rising global demand for Swedish candy and protein products. This supports higher revenue growth and better fixed cost absorption in gross margins.
• Expanding international distribution for TruDates and Swedish candy, including listings with major U.S. retailers and the swedishcandy.com channel, positions Humble to benefit from long term consumer shifts toward indulgent yet perceived better for you snacking. This is intended to lift segment revenues and EBITA over time.
• The SEK 80 million efficiency program and ongoing structural review, including headcount reductions and potential divestments, are intended to streamline the portfolio and reduce overheads. This is aimed at improving group EBITDA margins and accelerating deleveraging.
• Recovery in the U.K. Sustainable Care operations, coupled with licensing partnerships and new oral care and diaper launches, aligns with growing demand for branded, sustainable household and personal care products. This supports a return to stable organic growth and margin expansion in that segment.
• Optimization of marketing spend, especially in Quality Nutrition and Future Snacking, is expected to shift the focus from pure top line to profitable growth. This is aimed at driving better returns on advertising, improving net margins and supporting earnings resilience despite FX headwinds.

Assumptions

How have these above catalysts been quantified?

• Analysts are assuming Humble Group's revenue will grow by 5.9% annually over the next 3 years.
• Analysts assume that profit margins will increase from 0.5% today to 6.2% in 3 years time.
• Analysts expect earnings to reach SEK 598.7 million (and earnings per share of SEK 1.34) by about December 2028, up from SEK 44.0 million today. However, there is some disagreement amongst the analysts with the more bullish ones expecting earnings as high as SEK671.5 million.
• In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 8.5x on those 2028 earnings, down from 80.4x today. This future PE is lower than the current PE for the SE Personal Products industry at 48.4x.
• Analysts expect the number of shares outstanding to grow by 0.62% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.66%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Persistent FX headwinds in key markets such as Australia and the U.K. could structurally erode group level gross margins if currency movements remain unfavorable or intensify over the long term, weighing on earnings and limiting the upside from organic growth.
• The strategy of investing heavily in marketing, particularly in Quality Nutrition and Future Snacking, may fail to deliver sufficient incremental sales and pricing power. This could lead to structurally lower returns on marketing spend and put sustained pressure on net margins and earnings growth.
• Large capacity expansions at Grahns Konfektyr, the additional bar line in Australia and the new Privab warehouse increase fixed costs and leverage. Any slowdown in the global Swedish candy trend or weaker demand for bars and drinks could leave Humble with underutilized assets, depressing revenue scalability and group EBITDA margins.
• Ongoing portfolio streamlining, headcount reductions and potential divestments may distract management and disrupt operations. If executed poorly, these initiatives could dilute the strength of hero brands and local teams, ultimately dampening revenue momentum and delaying the targeted margin expansion.

Valuation

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

• The analysts have a consensus price target of SEK9.15 for Humble Group based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• In order for you to agree with the analysts, you'd need to believe that by 2028, revenues will be SEK9.6 billion, earnings will come to SEK598.7 million, and it would be trading on a PE ratio of 8.5x, assuming you use a discount rate of 6.7%.
  
• Given the current share price of SEK7.87, the analyst price target of SEK9.15 is 14.0% 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.