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Ecoclime: Some growing pains seen in the cost base - ABG

Net sales SEK 57m, adj. EBITDA SEK -4.3m Q2 numbers imply 15-20% adj. EBITDA downgrades 9x ’23e EV/EBITDA (adj.) on pre-Q2 numbers

Q2 outcome
Ecoclime reported net sales of SEK 57.4m (-13% vs. ABGSCe SEK 66m), and organic growth was 9.6% (ABGSCe 9.0%). The gross profit amounted to 28.0m (-31% vs. ABGSCe 40.8m), for a margin of 49% (ABGSCe 62%). Adj. EBITDA was -4.3m (ABGSCe 5.8m), and EBIT -was 13.3m (ABGSCe 1.0m), which included NRIs of -4.2m (ABGSCe -2.0m). Although growth is solid, the cost ramp-up continues at a higher rate than expected, both on COGS and opex. For the gross margin, the company says the decline stems from underperforming installation services, while product margins held up significantly better. We note that Ecoclime’s strategic focus is to move towards being more of a product company rather than an installations provider over time. Higher opex, the company says, is due to investing in future growth in Evertherm, which we believe will be the main earnings growth driver in coming years.

Estimate changes and outlook The isolated Q2 numbers would imply negative adj. EBITDA revisions of 15-20%. The sales ramp-up is fairly on track, and Circular Energy grew sequentially, but growing is costing more than what we had expected.

Final thoughts and valution On our pre-Q2 estimates, the share is trading at 9x ’23e EV/EBITDA (adj.), which comes down to 7x in ’24e. Looking at the Evertherm rollout, this is still largely in pace with our expectations. Assuming a SEK 2.5m ASP for an average Evertherm system, Ecoclime has delivered ~12 systems in H1 (and on our pre-Q2 estimates we have 26 for FY’22e).

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