The first quarter is usually the weakest for Doro and the high inflation in Q1’22 has given rise to headwinds for companies with retail exposure, including Doro. Moreover, the gross margin will be held back by FX headwinds, with the USD, Doro’s main purchasing currency, up 11% vs. the SEK y-o-y in Q1. We also believe that increased supply chain costs, which have not affected Doro before, will become noticeable in the quarter. We expect higher opex due to more travel and successful recruitments in the quarter. Overall, we expect both sales and profitability to be negatively affected by these factors and we factor in sales of SEK 209m and EBIT of SEK 11.5m, fairly in line with the weak Q1’21.
Lower organic sales growth estimates, but FX boosts 2022e
We lower our organic sales growth estimates for Q1 and Q2 by 4.2-1.5pp, but we expect FX to have a positive effect on the top line for the full year, prompting us to raise 2022e sales by 1.7%. Moreover, on the back of the above-mentioned cost headwinds, we lower our EBIT margin estimates to 5.5% (8.5%) and 8.0% (8.5%) in Q1 and Q2 2022e. This results in a 6% cut to full-year 2022e EBIT.
External factors the main reason for estimate changes
Except for the increase in opex, which we believe is to a “normalized” level, it is external headwinds that have caused us to reduce our estimates. Although these external factors are a risk for Doro, we are of the opinion that the fundamentals for Doro remain unchanged. The share is currently trading at 7x EV/EBIT for 2022e; our fair value range indicates an EV/EBIT multiple of 7x-10x for 2022e.
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