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A Nordic distributor of PPE, tools & consumablesAlligo is an industrial distributor with some proprietary products (<20%), selling personal protective equipment, tools etc. It has two main concept brands (80%), Swedol (Sweden) and Tools (Norway & Finland), along with several less integrated niche companies (20%). Swedol and Tools sell through both physical stores (58%), and directly to larger customers (42%). The customer base is broad, spanning many industries such as manufacturing (31%) and construction (23%). Customers range from large companies and the public sector, to SMEs and individuals. Emerging from a period of structural transformationAlligo was formed in 2021 following the acquisition of Swedol and the subsequent spin-off of Momentum Group. Since then, a lot has been done to integrate Swedol and Tools, including: 1) a Nordic standardised assortment, 2) centralising logistics operations, 3) concentrating the supplier base, and 4) a common organisation with the same ERP and IT. Key margin drivers are: 1) a larger share of SME customers and in-store sales, and 2) a larger share of sales from own brands. These have always been higher in Swedol, and since the acquisition, efforts have been underway to increase them in Tools. Set up for growth and significant margin expansionThe integration process has coincided with the market downturn in '23-'25, which has hit SMEs, Alligo's most profitable customers, hardest, hampering Alligo's growth and margins. The gross margin is intact, however, which, in combination with the major structural transformation, means Alligo is well set up to see significant margin expansion once it returns to organic growth, which we think will happen in Q4'25. We forecast a '25e-'27e adj. EPS CAGR of 22%. At a '26e-'27e EV/EBITA and P/E of 12-10x, we set a FV range of SEK 110-200. |