Nelly Group is a Nordic online fashion retailer that has executed a real turnaround: operating profit went from −SEK 56M (2021) to +SEK 166M, driven by a structural shift toward higher-margin own-brand product (62.7% of sales in Q1) plus disciplined cost and marketing management. The model is asset-light D2C, debt-free except for IFRS 16 leases, with net cash. We make no non-recurring add-backs (FY2025 had no items-affecting-comparability, no impairments), and — importantly — we normalise the tax rate to 20.6%: the reported tax was a non-cash SEK 14M BENEFIT from recognising a deferred-tax asset on SEK 444M of loss carry-forwards, which would have inflated ROIC to ~34%. On a normalised basis adjusted ROIC is ~24.6% (EP +SEK 78M).
The valuation is the attraction: at PEBV ~1.0 and a reverse-DCF of ~+47% even at zero growth (implied 5-year growth ~−12%), the market is pricing a decline for a business now earning ~2.7x its cost of capital on net cash. The check is momentum: Q1 2026 was soft (revenue −1.8%, EBIT margin 3.3%) and a new CFO just arrived. The thesis is quality-at-a-cheap-price provided the soft quarter proves seasonal rather than the start of a relapse.
On normalised adjusted NOPAT (SEK 123M) the reverse-DCF is ~+47% to the ~SEK 34 price at zero growth and ~+72% at 5% (PEBV ~1.0, EV/IC ~2.2x, ~7.4% FCF yield) — genuinely cheap if the turnaround margins hold.
Base SEK 38 (a partial re-rate from a market pricing decline, tempered by the soft Q1); bull SEK 48 if growth resumes and the own-brand margin gains stick (toward the zero-growth fair value ~SEK 51); bear SEK 28 if the Q1 softness is structural, margins compress and growth stalls.
The market pays today’s enterprise value for roughly -12.2% NOPAT growth over 5 years. The business earns 25% on capital against a 9% cost of capital (spread +15.6 pp); the no-growth value is SEK 51/share (150% of price), so the rest is priced-in growth.
| Scenario | 24m target | Impl. g | Upside | Prob. | Driver |
|---|---|---|---|---|---|
| Bull | SEK 48 | -2% | +40% | 35% | Growth resumes; own-brand margin gains stick |
| Base | SEK 38 | -9% | +11% | 40% | Partial re-rate from a market pricing decline; soft Q1 tempers |
| Bear | SEK 28 | -18% | -18% | 25% | Q1 softness structural; margins compress, growth stalls |
| Prob-weighted | SEK 39 | — | +14% | 100% | Scenario-weighted expected value |
| WACC \ g | 0% | 3% | 5% | 8% | 10% | 15% |
|---|---|---|---|---|---|---|
| 7.50% | 67 | 75 | 80 | 89 | 95 | 113 |
| 8.25% | 58 | 65 | 69 | 76 | 82 | 96 |
| 9.00% (base) | 51 | 57 | 61 | 67 | 71 | 83 |
| 9.75% | 46 | 51 | 54 | 59 | 63 | 73 |
| 10.50% | 42 | 46 | 48 | 53 | 56 | 64 |
Green = fair value above the current price of SEK 34.26. The reverse-DCF conclusion is dominated by WACC and growth — see the whole surface, not a single fair value.
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62.7% own-label in Q1 — the structural gross-margin and ROIC driver.
PEBV ~1.0, rDCF ~+47% at zero growth — the market prices a decline.
Debt-free ex-lease, ~24.6% normalised ROIC — the recovery is now profitable.
Leaner cost base sustains margin even on a flat top line.
Nelly is a genuinely turned-around, net-cash Nordic online-fashion retailer compounding at ~24.6% ROIC, trading cheaply (PEBV ~1.0, +47% at zero growth) as the market prices a decline. HOLD with a quality/value lean; base SEK 38.
Accumulate on weakness — the asymmetry favours buyers if the soft Q1 is seasonal; the thesis breaks if the top-line softness and margin give-back prove structural.
Every adjustment traces to the cited note/page in the source filing — click to open it there. Annual report / 10-K: 📄 open · Latest interim: 📄 open
| Adjustment / figure | Value | Source | Why mttssn treats it this way |
|---|---|---|---|
| Net revenue (LTM Q1 2026) | 1,259 | Condensed income statement, R12 2025 column / p.10 📄 p.10 | LTM = FY2025 1,263.6 - Q1'25 247.8 + Q1'26 243.3; report's own R12 column confirms 1,259.1. |
| Operating profit (LTM Q1 2026) | 154 | Condensed income statement, R12 2025 / p.10 📄 p.10 | Reported operating profit used as adjusted EBIT base; no non-recurring add-backs justified. |
| Items affecting comparability | 0 | The year in brief / p.7 📄 p.7 | 'Material events during the year: No material events' and no items-affecting-comparability line exists — hence zero restructuring/one-off add-backs. |
| Gross margin (FY2025) | 0.543 | Financial and operational information / p.9 📄 p.9 | Gross profit 686.0 / net revenue 1,263.6 = 54.3%; structural lift from own-brand mix (own-brand share 57.5%). |
| Inventories (Q1 2026) | 202 | Statement of financial position, 31/03/2026 / p.11 📄 p.11 | Inventory build vs FY (188.2) on soft Q1 sales; ~16% of LTM revenue; kept fully in operating working capital. |
| Interest-bearing debt (Q1 2026) | 278 | Statement of financial position, lease liabilities 244.0 + 33.5 / p.11 📄 p.11 | Only interest-bearing debt is IFRS 16 lease liabilities; no bank/bond debt; included in IC. |
| Cash and equivalents (Q1 2026) | 215 | Statement of financial position / p.11 📄 p.11 | Excess cash (215.3 - 2%*revenue = 190.1) subtracted from IC; external credit facilities unutilised. |
| Total equity (Q1 2026) | 412 | Statement of financial position, equity attributable to parent / p.11 📄 p.11 | Parent-only equity (no NCI); accumulated OCI ~0 (translation reserve -0.1m), so equity_ex_oci = 411.9. |
| Tax (normalization) | 0.206 | Note 7 Tax / p.74 📄 p.74 | Reported tax is a +14.1 deferred-tax benefit (DTA on SEK 443.9m loss carry-forwards), non-cash and unsustainable; NOPAT normalized at Swedish statutory 20.6% (cash tax paid FY only 0.1m). |
| Lease liabilities & ROU (Q1 2026 / FY note) | 278 | BS leases p.11; FY Note 19 Leases p.88-89 📄 p.11 | ROU 259.8m = 27% of assets, premises-dominated — primary operating asset for a fashion D2C model → lease_liabilities_in_ic = True; lease interest already below EBIT under IFRS 16 (no NOPAT add-back). |
| Capitalized development (intangibles) | 42.2 | Other intangible assets p.11; FY Note 8 p.75 📄 p.11 | Internal IT/web-platform capitalization (FY invest 20.6 vs amort 14.5); low intensity (~1.6% of revenue), retained in IC and amortization kept in opex — no R&D reversal for a retailer. |
| Goodwill (impairment test) | 39.7 | Note 8, goodwill impairment testing / p.76 📄 p.76 | Legacy Nelly-acquisition goodwill, indefinite-life (not amortized → no PPA amortization to reject); impairment test passed with headroom even at 0% terminal growth and +1% discount rate. |
| Free cash flow (LTM Q1 2026) | 76.2 | Statement of cash flows, R12 build / p.12 📄 p.12 | LTM operating CF 109.7 (123.1 - 26.4 + 13.0) less LTM capex 33.5 (32.1 - 2.1 + 3.5) = 76.2. |
How the mttssn view has evolved — each prior dated note is preserved.