Doro: Weaker sales saved by a strong gross margin - ABG

Sales -24% y-o-y, 8% below our expectations Strong GM held up EBIT, but some temporary effects We lower ‘22e-‘24e EBIT, mainly due to sales cuts Q2 details

Doro delivered sales of SEK 198.4m (-8% vs. ABGSCe of SEK 214.8m), -3% q-o-q and -26% y-o-y organically (ABGSCe -20%), driven by weakening demand following high inflation and significant uncertainty among end-consumers due to the Russian invasion of Ukraine. In addition, we note that the y-o-y numbers look exceptionally weak on very tough comps from Q2’21. The gross margin came in at 35.6%, well above our estimated 32%, which is partly explained by finalisations of account receivables that positively impacted the gross profit by SEK 4m. Adjusting for this, the gross margin was 33.6% following a further decrease in warranties, which we see as impressive given the unfavourable USD/SEK situation alongside higher freight and component costs. Adj. EBIT reached SEK 5.7m (+78% vs. ABGSCe of SEK 3.2m), for a margin of 2.9% (ABGSCe 1.5%, 2.1% in Q1’21) due to the strong gross margin. Opex levels were largely in line with our expectations.

Estimate revisions On sales, we lower our estimates on the back of the weaker demand. Given that some of the lowered sales are due to temporary effects, we raise sales growth in 2023e to be flat y-o-y, while we hold ‘24e growth constant. We raise our gross margin assumptions slightly following the continued decrease in warranties, while the non-recurring finalisation of account receivables is not extrapolated. We make only minor revisions to our estimates for opex. In total, we lower ‘22e-‘24e EBIT by 8%-11%.

We lower our fair value range following estimate cuts Our new FV range is lowered to SEK 17-26 per share on the back of our estimate cuts, which corresponds to a ‘23e EV/EBIT of 4x-7x. At the current share price level, Doro is trading at a ‘22e-‘23e EV/EBIT of 8x-4x. Läs mer på ABG Sundal Collier

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