CTT Systems: The runway is clear - ABG

33% org growth, but 27% EBIT miss due to OEM+VIP+FX
26% EBIT CAGR 2022-2025e on >30% margins
25-15x EBIT '23e-'25e, ~40-50% ROCE, net cash


OEM and private jet to take off in Q1

CTT continued to deliver steady sequential growth on the back of high aftermarket (AM) demand and gradually recovering system sales. Sales grew 61% y-o-y (-4% vs. ABGSCe), 33% organically (ABGSCe 49%) and +4% q-o-q. For Q1, we expect AM sales to normalise towards the H1'22 levels, but that a clear ramp-up in system sales should yield sales of SEK 69m, +1% q-o-q and 31% y-o-y organically, at the lower end of the guidance of SEK 68-73m. In addition, less FX support and a relatively lower AM share of sales (80% in Q4'22, ~60% in H1'23e) should yield EBIT margins of ~30%, vs. the very high levels of 40-50% seen in Q2'22-Q3'22, before gradually improving in H2'23e to yield FY'23e EBIT margins of 36%. We remain optimistic on CTT's progress towards higher penetration rates, the good hit rate in the private jet segment and that the recent threat of 'copy cats' in the AM business will be mitigated in a good way. In Q4'22, EBIT grew 160% y-o-y (-27% vs. ABGSCe) and ~120% y-o-y organically. We expect continued high EBIT growth in Q1'23e, before turning negative in Q2'23e due to tougher comps, but that earnings should still grow 23% y-o-y for the full year (growth also in H2'23e).

Länk till analysen i sin helhet: https://cr.abgsc.com/foretag/ctt-systems/Equity-research/2023/2/ctt-systems---the-runway-is-clear/