In this equity research report, analysts William Voldseth and Elvira Husén present an in-depth fundamental analysis of Karnov Group, a market leader in digital tech offering a civil law database for the legal industry. The company is at an inflection point and is set to capitalize on an AI tool and increased profitability in Southern Europe, which are estimated to drive the EBIT margin from 6% to 26% by 2027E. An equally weighted DCF and peer valuation support a target price of SEK 132, indicating a potential upside of 40%.
Investment Thesis
● The stickiness of Karnov’s products and the associated switching costs result in a 92% customer retention rate and strong loyalty, supporting pricing power
● The AI tool is a profitable upsell opportunity across the customer base, estimated to boost sales by 15% and increase the EBITDA margin by 12 percentage points
● Southern Europe is at an inflection point, with strong profitability improvements expected, reaching a 24% EBITDA margin by 2027E, up from 0.5% in 2024A