CTT Systems: Destocking complete, strong growth in Q4 - ABG

10% org. growth, 3% EBIT miss, good Q4 guidance
28% adj. EBIT CAGR '22-'25e on >30% margins
23-14x EBIT '23e-'25e, ~40-50% ROCE, net cash


Return to >40% EBIT growth in Q4

CTT's streak of sequential quarterly growth since Q1'21 stopped in Q3, as sales grew 10% y-o-y organically (ABGSCe 14%) but declined 7% q-o-q due to inventory adjustments. However, management claimed that inventory levels among OEMs and distributors had normalised sooner than expected while end-market demand remains strong, and therefore guides for a return to sequential growth in Q4. We forecast Q4 org. sales growth of 18% y-o-y and 12% q-o-q, supported by notably higher OEM sales and stable aftermarket growth. Profitability remained high (41% EBIT margin, ABGSCe 44%), but EBIT declined 9% y-o-y due to tough comparables. Although a higher share of system sales should dilute margins somewhat, we expect margins to remain at strong levels (36%) and drive a return to good EBIT growth (45% y-o-y) in Q4. Given the strong backlogs at OEMs, continued good air traffic and the VIP and retrofit for CTT in coming years, we reiterate our view that CTT is set for a multi-year period of clear double-digit earnings growth.

Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/ctt-systems/Equity-research/2023/10/ctt-systems---destocking-complete-strong-growth-in-q4/