• We raise '25e-'27e EBITDA by 35-40% on the recent SEK 1bn order
• 2025 will be a strong year: sales +135% y-o-y
• More Ovzon-3 orders in H2e, 17x-11x '25e-'26e EV/EBITDA

Groundbreaking deal

The recent SEK 1bn order from the Swedish Defence Materiel Administration (FMV) is a real game changer for Ovzon. The contract's value is immense in both relative and absolute terms — it is the largest order the company has ever received — and it reduces B/S concerns, validates its offering, broadens the customer base and increases the durability of its order backlog (historical contracts have lasted for 12 months at most, whereas this contract spans 24 months). For context, FMV/SSC began piloting Ovzon's services in Dec'22 and has since gradually expanded the contracts. We believe this suggests that the customer is satisfied with the service and will likely continue using it after the current contracts expire.

Positive estimate revisions

Following the news, we raise our '25e-'27e sales and EBITDA estimates by 57-49% and 35-40%, respectively. Surprisingly, the recent order was for the company's leased capacity business and not Ovzon-3, which we believe reflects differences in geographical coverage. Although gross margins are materially lower for its leased-capacity business (around 50%, according to our estimates), this suggests there is more potential for Ovzon-3-related orders, given our estimate that only ~40% of the company's proprietary satellite is utilised as of Q2e.

Strong 2025e on the cards

We expect Q2e to be strong, with sales of SEK 197m and EBITDA of SEK 70m (36% margin). This is supported by the FMV order, which we expect will contribute Terminal sales of ~SEK 75m. We now anticipate sales of SEK 786m and EBITDA of SEK 295m in '25e, driven by high operating leverage on improved sales. Although gearing remains high (NIBD of SEK 523m in Q1), continued positive FCF will lead to deleveraging. The stock is trading at 17x-11x '25e-'26e EV/EBITDA (with a 3-8% FCF yield).