Revenue growth of 25,2% CAGR from 2016 to 2022 due to aggressive international expansion. We expect revenues to grow to 2,9 billion SEK in 2022, up from 700 MSEK in 2016, which equals a CAGR of 25,2%. The revenue growth will mostly be driven by the international scale-up, as the company will continue to focus on becoming profitable in launched markets which are not yet profitable. Storytel is currently in a scale-up phase on 7 European markets (incl. Turkey).

EBIT-margin of 9% in 2022 as more markets expected become profitable and stable. After an aggressive expansion period, driven by higher than average content- and marketing costs in order to penetrate new markets, we expect the company to increase EBIT-margin from 2017’s negative -6%, to positive 9% 2022E. The margin improvement will be achieved mainly due to economies of scale. Our expectation of the pace of this transition is more conservative compared to the market consensus, the company itself expects a long-term EBIT-margin of 15% in profitable markets.

DCF- and SOTP valuation signal bullish market expectations. Adding up our valuations of Storytel’s three business divisions (SOTP valuation), we arrive at a share price of 80 SEK. This corresponds to a downside of -24% from today’s share price. A DCF with a WACC of 10,3% using both exit multiples (average of peers’ EV/EBIT, EV/EBITDA, EV/S and P/E, calculated on the estimates of 2022E) and perpetual growth of 3% indicates a share price of 74 SEK, corresponding to an even greater downside from today’s share price (-30%). We consider the SOTP valuation to be the most adequate methodology for assessing a fair share price of Storytel, as the two main business areas differ in financial profile and the Streaming sub-divisions are in different stages.

Analysts: Markus Ljunggren and Ola Johnsson