• '25e sales cut by 5%, three system deliveries for '25e (prev. four)
• We expect more market softness for the rest of the year
• 2.4x-2.0x '25e-'27e EV/sales

Q1 results

Impact Coatings delivered sales of SEK 9.5m (ABGSCe 7.2m), with no machine deliveries in the quarter, as expected. Costs remained under control despite lower volumes, and EBIT was stronger than expected at SEK -14m (ABGSCe -20m). Q1 was a soft quarter for Impact, with lower business activity, partly due to seasonal effects and a cautious investment environment. We expect these market conditions to continue for the rest of the year but believe that the company is well-positioned to execute on orders once momentum picks up. Furthermore, the company improved its cash flow both q-o-q and y-o-y, and reported lease-adj. FCF of SEK -5.6m (vs. ABGSCe -17m). Moreover, it ended the quarter with a cash balance of SEK 26m compared to the R12m lease-adj. FCF of SEK -72m.

Estimate changes

We lower '25e sales by 5% and '25e-'27e EBIT by SEK 3.6m after the Q1 report. We now estimate the company will deliver three systems in '25e (vs. four previously) due to a continued soft market. This is slightly offset by our raised estimates in Coating Services, which showed good improvement in the quarter despite lower activity. We now expect Coating Services to grow 36% y-o-y in '25 (vs. previously +20%). In addition, management highlighted that it has witnessed an increased volume of samples for customers, indicating that customers are approaching commercial decisions, which should support '25e.

Long-term view unchanged

Despite a softer quarter, we continue to believe that the substantial investments in the Chinese hydrogen market present a significant growth opportunity for Impact Coatings. The company is currently trading at 2.4x-2.0x '25e-'27e EV/sales vs. peers at 1.0x-0.8x, with current multiple levels reflecting a company in early-stage development with high growth potential, in our view.