CTT Systems: 2025 outlook remains firm, but dependent on OEMs - ABG
- Q3 pre-announced, outlook encouraging but dependent on OEMs
- Consensus could lower '24e-'25e EBIT by 10-15%
- Share already reacted to pre-announcement, likely only down slightly today
Q3 details
The Q3 was partly pre-announced (sales, EBIT and org. growth) on 21 October, with sales of SEK 57m 33% below ABGSCe due to an 18% organic sales decline (ABGSCe +18%). EBIT declined 51% y-o-y to SEK 15m (ABGSCe 34m), corresponding to a 26% EBIT margin (ABGSCe 40%, 41% Q3'23). This was due to 24% lower system sales vs. ABGSCe, and 35% lower AM sales, as AM sales declined 24% y-o-y (+4% growth in Q2'24).
Outlook and estimate changes
In connection to the Q3 profit warning, CTT reiterated Q4 sales of SEK 80-90m (ABGSCe 93m) due to flat OEM sales q-o-q, a recovery in AM sales and "significantly higher revenues in Private Jet". Today, CTT provides further forward-looking comments by saying that CTT's delivery plans from Q1'25 to Airbus/Boeing are expected to be in line with the aircraft build rates. In addition, the CEO flags that 2025 will benefit from 1) increased build-rates, 2) higher content per aircraft, 3) a strong sales revival in private jet, while quotations for the dehumidifiers have also increased lately. As we wrote on 21 October, the Q3 miss would mechanically lower consensus '24e EBIT by ~15%, where most of the Q3 issues should not be extrapolated. However, the ongoing production issues at Boeing and Airbus (lower-than-expected production rates) together with a slightly lower aftermarket base by YE'24e could imply low-to-mid-teen EBIT revisions to consensus EBIT also in 2025e.
Final thoughts
Encouraging outlook, but key will be how quickly Airbus and Boeing can step up their production rates. The share has underperformed the market into numbers (-11% L1M vs. OMXSGI -2%) and is on our pre-Q3 numbers trading at 28-14x EBIT '24e-'26e, compared to its L10Y average of ~23x. Thus, considering the negative reaction in connection to the pre-announcement, we would expect a fairly small negative reaction on the day.
Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/ctt-systems/Equity-research/2024/10/ctt-systems---2025-outlook-remains-firm-but-dependent-on-oems/
