CTT Systems: ~40% margins and good guidance - ABG
- 10% org. sales (ABGSCe 14%), 9% EBIT decline
- Cons 2023e EBIT roughly unchanged (excl. FX)
- Q4 guidance better than ABGSCe, 23-14x EBIT '23e-'25e
Q3 details
Sales came in at SEK 74m (+2% vs. ABGSCe), 13% y-o-y of which 10% organically (ABGSCe 14%) as aftermarket sales held up better than expected (+1% y-o-y, +4% vs. ABGSCe), while system sales grew slightly less than expected (83% y-o-y, -5% vs. ABGSCe) due to slightly lower OEM deliveries. EBIT declined 9% y-o-y and reached SEK 31m (-3% vs. ABGSCe), for a margin of 41% (ABGSCe 44%, 51% Q3'22). For Q4'23, CTT guides for sales of SEK 80-85m, with the mid-point of ~83m (+5% vs. ABGSCe 79m) implying 12% growth q-o-q and 22% y-o-y. According to the CEO, this is due to significantly higher OEM deliveries and increased sales in the aftermarket. In addition, the CEO says that inventory levels have normalised faster than expected, which will have a positive impact on sales early in Q4, but that private jet could be weak in Q4 due to completion project delays. Finally, we find it positive to hear that another customer has selected humidifiers for the A350, which should be positive for sales in 2024. Looking ahead, the CEO states that CTT is in the beginning of a multi-year growth period. Free cash flow was good at SEK 26m (~90% of EBIT).
Estimate changes
On isolated numbers and the Q4 guidance, we believe FactSet 2024e EBIT could remain roughly unchanged, excluding updated FX, as better momentum in OEM and aftermarket will offset the delays within private jet.
Final thoughts
A relatively in-line report but better guidance than expected. Positive to see that the two main drivers, OEM and aftermarket, are expected to grow better than expected in Q4. The share has held up better than the broader market into numbers (-2% L1M vs. OMXSGI -5%) and is trading at 23-14x '23e-'25e EV/EBIT.
Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/ctt-systems/Equity-research/2023/10/ctt-systems---~40-margins-and-good-guidance/
