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GOMspace: Q2 expected to be a weak quarter - ABG

Increased costs likely to squeeze Q2 margins Guidance likely to be reiterated given strong Q1 buffer We keep our scenario-based FV range of SEK 7-45 Continued component shortage and inflation pressures Q2
Going into the Q2 report, we expect low sales growth of 5% (FactSet consensus 37%) and negative pressure on margins due to continued component shortages and a higher cost base (raw materials, utilities and wages). We thus expect an EBIT margin of -30% (cons. -14%). The underlying hurdle is the firm’s inability to properly deliver on high-margin product orders due to the delay of certain components and the fact that many of the low-margin, engineering-heavy orders are seeing diminished profitability due to higher wages.

Strong orderbook support, reiterated FY’22 guidance While Q2 is expected to be weak, we note that Q1 was a strong quarter (sales up 122% and an EBIT margin of ~5%), providing a buffer for FY’22 guidance, which we continue to see as being within reach. FY’22 guidance calls for revenues of SEK 264-292m (ABGSCe 278m, cons. 281m) and an EBIT margin “better than -15%” (ABGSCe -12.5%, cons. -12.1%). The feasibility of the FY’22 guidance is further supported by a continued strong order backlog at SEK +500m.

We expect to hear more about the long-term strategy at Q2 While we expect a weak Q2, we note that quarters are very volatile within this industry. As such, we place more focus on the broader outlook, with the Q2 report likely to highlight more details of the new long-term strategy GomSpace is initiating. Overall, we change our estimates slightly on a volume basis, to reflect the weaker Q2 and some cost pressure (wages) spilling into FY’23. Ultimately, however, we reiterate our scenario-based fair value range of SEK 7-45.

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