C-RAD: Softer as APAC comes to a halt - ABG

Orders 2% better, sales 3% below, EBIT 94% below
Lost installations should come back in H2
High growth, attractive position, at large discount to peers

Q1 report
C-RAD delivers solid Q1 order intake, 23% higher than last year and 2% better than we expected. However, because of the challenging conditions in APAC with severe lockdowns, sales were 3% lower than we expected at SEK 56.3m, and down 10% y-o-y organically. APAC sales was 23% lower than we expected. On the other hand, Americas was 24% better than expected, and EMEA was in line with expectations. The gross margin was strong at 64.3% (61%), driven by a higher proportion of direct sales. It resulted in aa gross profit 1% higher than we expected. However, opex was up 20% y-o-y and 12% higher than we expected. As such, it led to a large hit to the seasonally low-margin Q1, with EBIT at SEK 0.2m. It was down 97% y-o-y, and 94% below what we expected.

Outlook and estimates
We expect the challenging conditions in APAC to subside. Varian, a major linac manufacturer, has faced the same issue, with lower installations, but reiterated its full year guidance as it expects to recover lost volumes in H2. As C-RAD’s products are often installed in conjunction with new linacs, we believe that it too can recover most of the lost volumes throughout the year. However, opex estimates are likely to come up, party on the higher-than-expected Q1 level, but also as C-RAD communicates that it will increase its commercial team by ~33% over the coming quarters. All-in-all, consensus cuts to FY’22 EBIT of ~10% seem reasonable.

Valuation and mid-term prospects
We think the issues are temporary and should subside over the coming two quarters. Considering the mid-term prospects, it offers an attractive exposure to the ongoing standardization of SGRT, in a leading position. With a 49% EBIT CAGR in ’20-’25e, C-RAD is one of the fastest growing companies in its peer group, while at the same time being valued 41% lower than peers on ‘23e EV/EBIT media ...
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