Embracer Group (Buy, TP: SEK42.00) - Spin-offs set to unlock value

We reiterate our BUY and SEK42 target price ahead of the Q2 results (due at 07:00 CET on 14 November), which we view as rather uneventful. We find the outlook attractive, including the spin-off of Asmodee board-games set for early next year and upcoming key game releases. PC/Console earnings should improve in H2e and we see upside potential on further FCF improvements and net debt reduction. We expect increasing investor focus, driven by Asmodee (CMD scheduled for 19 November before the spin-off...

Embracer Group (Buy, TP: SEK42.00) - Set to improve during the year

Q1 saw Embracer miss our adj. EBIT expectation in a quiet release quarter for PC/Console. Key title Kingdom Come: Deliverance 2 now has a firm release date, moved from Q3 to Q4, that together with typical seasonality in e.g. Tabletop, implies an H2-heavy year. We have cut our 2024/25e adj. EBIT by ~4% to reflect the Q1 results, Q2 guidance, and release calendar. We have lowered our target price to SEK42 (45), but reiterate our BUY as we like the cash flow improvement story and coming spin-offs (...

Embracer Group (Buy, TP: SEK45.00) - Looking past uneventful H1

We maintain our BUY and SEK45 target price ahead of what we expect to be fairly uninspiring Q1 results (due at 07:00 CET on 15 August), with adj. EBIT set to be hampered by a very quiet release quarter, but in line with the guidance. We have fine-tuned our earnings estimates and adjusted for the sale of parts of Gearbox, which has improved Embracer’s balance sheet (2024/25e net debt of SEK6.4bn). We continue to expect a re-rating due to improved cash flow, reduced risk and upcoming spin-offs unl...

Embracer Group (Buy, TP: SEK45.00) - Tracking to plan

We reiterate our BUY, but have lowered our target price to SEK45 (47), after a Q4 sales miss. We have cut our 2024/25e EBIT by c10% mainly to reflect the lower-than-expected guidance for stable adj. EBIT YOY in 2024/25. Despite this, we believe Embracer has made good improvements (more credible cash flow focus) and we see potential for a further re-rating on improving underlying FCF.

Embracer Group (Buy, TP: SEK47.00) - An attractive spin-off story

We have raised our target price to SEK47 (38) and reiterate our BUY, after increasing our 2024/25e adj. FCF by >30% on the divestment of parts of Saber. We expect Q4 adj. EBIT of SEK1.5bn, up 65% YOY, in line with the guidance, and more visible cash flow improvement. Our target price corresponds to a c10% discount to our SOTP, based on our scenario analysis for the three entities in the planned spin-offs.

Embracer Group (Buy, TP: SEK38.00) - Stormy but in a better position

We have lowered our target price to SEK38 (43) after a 9% cut to our 2024/25e group EBIT (weaker than expected PC/Console delivery and near-term outlook), but reiterate our BUY as we expect better FCF and still see a high probability of a potential divestment, which should improve the balance sheet materially. We acknowledge the low investor confidence, but believe the company is in better shape after the restructuring.

Embracer Group (Buy, TP: SEK43.00) - Closing in on FCF delivery

We see a good potential that Embracer will achieve key catalysts: Q3–Q4e adj. EBIT of SEK2.2bn–1.8bn; more FCF improvements; and potential divestments to strengthen the balance sheet. We have reduced our 2023/24e EPS by 3% and cut our target price to SEK43 (45), but reiterate our BUY, expecting Tabletop and Mobile to be healthy in Q3. Also, we believe an improved back catalogue and release schedule bodes well for PC/Console in Q4.

Embracer Group (Buy, TP: SEK45.00) - Cash flow improvement started

We reiterate our BUY and SEK45 target price following a Q2 report with higher cash flow, maintained guidance for 2024/25e net debt, healthy execution of the restructuring so far, and likely further sequential improvements ahead. We have left our underlying EBIT forecasts fairly intact, while we have increased our 2024/25e FCF to better reflect the company’s ambition to lower run-rate capex.

Embracer Group (Buy, TP: SEK45.00) - Time for delivery in H2

We reiterate our BUY and SEK45 target price, having only fine-tuned our estimates ahead of the Q2 results, due at 07:00 CET on 16 November. We expect Q2 adj. EBIT down by 26% YOY due to harsh comparables after the Saints Row release. Embracer clearly needs to improve its near-term FCF; we remain fairly positive on the outlook due to a healthier back catalogue, and PC/Console EBIT and cash flow improvements in H2e.

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Embracer Group (Buy, TP: SEK45.00) - 2023/24 off to a solid start

Q1 sales were 10% higher than forecast, but adj. EBIT was 2–6% below our estimate and consensus, driven by weak back catalogue sales. Embracer reiterated its 2023/24 adj. EBIT guidance of SEK7bn–9bn, with ‘increased confidence’ based on solid YTD progress. With a strong release schedule for the rest of the year and cost and FCF improvements expected near-term, we reiterate our BUY and SEK45 target price.

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Embracer Group (Buy, TP: SEK45.00) - In search of cash-flow execution

We reiterate our BUY, but with a lowered target price of SEK45 (50) ahead of the Q1 report (due on 17 August at 06:00 CET). We expect healthy underlying EBIT, driven by the successful release of ‘Dead Island 2’, but have cut our 2023/24–2024/25e adj. EPS by 8% to reflect the SEK2bn rights issue and financing costs. Focus should continue to be on cash flow and guidance; we believe any further colour on the implicit 2023/24 FCF guidance of SEK~6bn could help improve the low investor confidence.

Embracer Group (Buy, TP: SEK50.00) - Needs to level up

We reiterate our BUY, but with a sharply lowered target price of SEK50 (100) following Embracer missing out on a potential ‘ground-breaking strategic partnership’ and the ensuing >30% cut of its 2023/24 adj. EBIT guidance. We have reduced our earnings forecasts significantly and applied a more cautious target multiple (10% FCF yield). Management is left with a heavy burden of proof, but even with an FCF forecast below its target, we believe minor cash flow improvements should support the stock.

Embracer Group (Buy, TP: SEK100.00) - An eventful year ahead

We reiterate our BUY and SEK100 target price ahead of the Q4 report (due at 06:00 CET on 17 May). We expect a soft quarter, having stripped out a cSEK1.5bn adj. EBIT effect from ‘transformative partnerships’ delayed by one quarter, and have thus raised our 2023/24e by 6%, not fully offsetting a nearly 20% cut to our 2022/23e based on lower partnership deal confidence. That said, we still believe in the case for earnings and cash improvement and expect rebounding PC/Console earnings ahead.

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Embracer Group (Buy, TP: SEK100.00) - Cash flow inflection point

We reiterate our BUY and SEK100 target price despite having cut our 2023/24e adj. EBIT by 7%, towards the low end of Embracer’s maintained guidance. With a credible operating cash flow increase, incoming transformative partnerships, and a sizeable and interesting games pipeline, we believe the risk/reward has improved. We expect FCF, before earnouts, to rise to cSEK5bn in 2023/24, up c150% YOY.

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Embracer Group (Buy, TP: SEK100.00) - Slight cash-flow improvement lik...

We have lowered our target price to SEK100 (105) to reflect a c5% cut to our adj. 2023/24e EBIT but reiterate our BUY ahead of the Q3 results (due at 06:00 CET on 16 February). We still expect H2, and especially Q4, to be an inflection point for cash flow supported by e.g. Tabletop and transformative platform deals. For 2023/24, Embracer expects to release four AAA games, starting with the long-awaited ‘Dead Island 2’ in Q1, likely supporting medium-term organic growth.

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