Return to >40% EBIT growth in Q4
CTT's streak of sequential quarterly growth since Q1'21 stopped in Q3, as sales grew 10% y-o-y organically (ABGSCe 14%) but declined 7% q-o-q due to inventory adjustments. However, management claimed that inventory levels among OEMs and distributors had normalised sooner than expected while end-market demand remains strong, and therefore guides for a return to sequential growth in Q4. We forecast Q4 org. sales growth of 18% y-o-y and 12% q-o-q, supported by notably higher OEM sales and stable aftermarket growth. Profitability remained high (41% EBIT margin, ABGSCe 44%), but EBIT declined 9% y-o-y due to tough comparables. Although a higher share of system sales should dilute margins somewhat, we expect margins to remain at strong levels (36%) and drive a return to good EBIT growth (45% y-o-y) in Q4. Given the strong backlogs at OEMs, continued good air traffic and the VIP and retrofit for CTT in coming years, we reiterate our view that CTT is set for a multi-year period of clear double-digit earnings growth.
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