Humble Group - Looking to get leaner

• '25e-'27e adj. EBITA down 6-4%
• '26e-'27e: expect better margins but less org. growth
• Seems more exploratory with regard to divestments

Takeaways from the report

Q3 was slightly better than expected with regard to growth (~3pp better organic growth than FactSet consensus), but a little bit softer on earnings (-7% vs. consensus). Future snacking and Nordic Distribution performed relatively well, while Quality Nutrition and Sustainable care were somewhat more sluggish. One historical investor concern has been the company's free cash flow generation, and we saw some evidence of that in this quarter. It is likely that this will continue as the focus shifts to margin expansion. As well, we note that the company seems more direct in its communication with respect to potential divestments.

Estimate changes

We cut '26e-'27e sales by 1% and '25e-'27e adj. EBITA by 4% after the report. We have become slightly more cautious on the company's growth profile, as we get the impression that it will prioritise profitability as opposed to growth and future scale with new leadership. We have previously held that the company will undergo acquisitions to fuel growth. However, with the most recent commentary around divestments and strategic reviews, we believe that this is less likely, as it is somewhat unclear what types of subsidiaries are on the table.

Valuation

Based on our revised estimates, the company is trading at a '25e EV/EBITA of 8.5x, which is ~45% below the peer average, despite peers growing earnings at a slower rate than Humble.