• Sales -7% (EEs -9%, SCs +15%), EBIT -19% vs. our estimates
• Opex in line, low equipment sales only a timing effect
• EEs will recover throughout the year, supported by new programmes

Q1 results

Sales fell 16% y-o-y and were 7% below our estimate. Annualised engine equivalents produced were 3.1m, falling 21% y-o-y, and were thereby 9% below our estimate. Sampling cups sold increased 3% y-o-y, and were 15% above our estimate. EEs did not recover q-o-q as we had anticipated, which in conjunction with low equipment sales drove the miss. With a margin of 37.6%, 5.5pp below our estimate, EBIT adj. was 19% below our estimate. Opex was however in line, supported by anticipated positive FX-hedge revaluations, meaning the EBIT miss was entirely driven by the lower sales.

Estimate changes

Q1 numbers in isolation imply EBIT adj. down 5%. The company reiterated its guidance of y-o-y growth in equipment sales, and this can be volatile between quarters, so we think the lower figure is simply a matter of timing, and the company also stated that this will be biased to the second half of the year. The lack of recovery in EEs is a bit more unfortunate, as we had hoped that holiday shut-downs in Q4 would drive a q-o-q increase, but note that the ramping of the FAW and MAN programmes (1m EEs together), as well as other unspecified new installations, will drive EE recovery throughout the year. The company also believes the commercial vehicle market will improve in H2.

Company valuation

Over the past three months, the share has returned -1%, compared to the -8% of the OMX Stockholm Allshare. The share is currently trading at 18x-13x '25e-'27e P/E, compared to its 10-year historical median of 23x-15x.