* Pre-announced sales down 28% y-o-y due to several headwinds * 5m EE milestone pushed to '27 due to market, installations strong * Return to growth in '26 on pent-up demand and programme ramps Market headwinds and tough comps weigh on Q3 As indicated by the pre-announcement made in October, Q3 was marked by several headwinds, as serial production dropped 23% y-o-y to 2.7m EEs. Sales were SEK 23.5m, down 28% y-o-y, of which we estimate 8pp to be FX-driven. Roughly half of the 0.8m EE y-o-y decline was due to the known shutdown of a 0.4m production programme in September '24; more importantly, a 33% reduction in commercial vehicle production impacted volumes by 0.57m EEs, although this was partially offset by a 0.15m EE increase in passenger vehicle and off-road production. The EBIT margin was 23.8%, 1.1pp better than our estimate due to a more favourable mix benefitting the gross margin. 5m EE milestone delay already in estimates Due to market headwinds this year, which led MAN to extend production of its previous generation engine and FAW to delay the start of production of a new engine family, as well as the suspension of EPA 2027 negating an expected pre-buying effect of new vehicles, SinterCast now expects to reach the 5m EE milestone in '27 ('26). It also expects installation activity to remain strong, exceeding SEK 10m in '25 and SEK 8m in '26. Both of these were already reflected in our estimates. While the recent fire at automotive supplier Novelis is expected to impact Ford F-150 assembly in Q4, there have been no indications of reduced orders for its SinterCast-CGI based engine, and the company expects engine production to continue at pace while assembly catches up. Several tailwinds for a return to growth in '26 While current headwinds are substantial, comps ease significantly from Q4, and pent-up demand for fleet renewal as well as delayed programme starts and strong installation activity bode well for a return to growth in '26. We therefore reiterate our fair value range of SEK 90-110.
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