We have seen three positive order announcements from CTT recently. First, CTT at our ABGSC Investor Days (8 December) highlighted the retrofit potential within dehumidifiers for the short-haul market, and the Russian market in particular (a USD 15-30m market). This potential has now become a reality, with a SEK 14m order from Russian low-cost carrier Pobeda Airlines. The order is for 20 Boeing 737-800NG aircraft (SEK 0.7m per unit), with deliveries during 2022. By comparison, we forecast Retrofit sales of SEK 12m in 2022 (4% of est. group sales). Thus, the Pobeda order fully covers our current estimate. Although retrofits will be a smaller part of CTT’s business, we believe this highlights the potential from future retrofits as more airlines understand the cost (and environmental) benefits of installing dehumidifiers. …and recent VIP orders cover ~34% of our 2022e VIP sales The other two orders relate to CTT’s VIP/private jet systems for two Airbus corporate jets (ACJ319neo) and one Boeing aircraft (BBJMAX8), and we estimate that these together amount to SEK 12m. This in turn would cover ~34% of our SEK 35m VIP forecast for 2022e. In addition, we find it positive that CTT continues to secure orders from Airbus, as the company estimates that VIP sales to the Airbus ACJ320 family and the ACJ220 could be a USD 4.5m market (annual sales). Our 2025e VIP assumption of ~SEK 120m (~20% of group sales) is based on CTT gaining traction mainly with Airbus, Bombardier and Gulfstream. CTT continues to hold a monopoly position in all of its niches. Increased confidence in 11% adj. EBIT CAGR ’19-‘25e We argue that the recent order wins are positive for the likelihood of CTT gaining traction within the retrofit and VIP/private jet market. However, the main earnings driver will continue to be CTT’s aftermarket business, which in the near-term could be negatively affected by reimposed travel restrictions due to the Omicron variant. On our forecasts, CTT is trading at 25-19x EBIT ‘22e-‘23e (13x ‘25e) and is set to deliver a >20% adj. EBIT CAGR ‘22e-‘25e while yielding >30% margins and >40% ROCE.
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