For Q1, we expect sales of SEK 32m, up 3.7% y-o-y (4% org., -0.3% FX). We estimate EBIT of SEK 6.1m (8.3m), for a margin of 19.2% (27.1%), which we expect to convert to net income of SEK 5.7m (6.7m). This implies EPS of SEK 0.48 (0.56), and FCF of SEK 6.6m (10.9m). We expect Q1 to show stronger results compared to Q4 and to demonstrate that Q4 was only a temporary dip.
Estimate changes and outlook
Ahead of the Q1 report, we make some changes to our estimates for organic sales growth, costs and NWC. These, together with our updated USD FX forecast, lead to a reduction in '24e-'26e sales of 0.2% and EBIT of 9-6%. During the quarter, a leading global coating company, PPG, introduced a new antifouling product containing I-Tech's Selektope within its premium range of coatings, de-risking our '24-'26 estimates. This brings the total number of customers with products on the market up to 4 (out of ~9 relevant potential customers that control ~80% of the market). Furthermore, the company has announced that it is expecting an additional customer launch later this year, which is expected to be both for the new-build and dry-docking market. We see these agreements as a positive as customers are moving forward with I-Tech despite the ongoing regulatory process. Additionally, the company has communicated its aim to increase its gross margin by reducing costs through a new potential supplier in India. The overall outlook for the company remains largely unchanged, in our view, and we believe in continued sales growth and profitability improvements over time.
We reiterate our fair value range of SEK 55-140
The share is currently trading at 13x-6x EV/EBIT '24e-'26e, and 19x-10x P/E '24e-'26e i.e. ~40-50% below the peer median. We reiterate our fair value range of SEK 55-140.
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