Ecoclime: Turning a page with new CEO - ABG

Q2 report due on Thursday, 17 AugustEBIT down on lowered marginsHopefully more clarity on strategy with new CEOQ2 expectations

We expect Ecoclime to report Q2 net sales of SEK 69m, up 20% y-o-y, with growth being driven by Evertherm sales in Circular Energy (CE). While still very high, this is a notable step down from the >100% growth in CE in the two prior quarters, and this is mostly an effect of higher interest rates affecting Evertherm's ROI. Smart Properties should continue its strong trend, where the Miljöbelysning subsidiary should be less cyclical. Gross margins will likely remain under pressure due to poor profitability on installation contracts, while the opex base, which has increased significantly in recent quarters, will likely stay high for EBIT of SEK -5m (-13m).

EBIT lowered, mainly on lowered marginsDue to decreased willingness among real estate companies to invest in Evertherm, we lower our top-line estimates in Circular Energy by 5%. Moreover, we assume a slower margin ramp-up in both CE and Indoor Climate, partly offset by raised margin assumptions in Smart Properties. All in all, our '23e-'25e EBIT declines by SEK 7m, 6m, and 9m, respectively.

Hoping for clarity on strategy with new CEO Krister WernerThis will be the first quarterly report since new CEO Krister Werner took charge. In the last few quarters, Ecoclime has undergone high turnover in both the management team and the board, and as such the company's long-term strategic direction has seemed uncertain, while the share has come down 38% YTD. We therefore believe the most important aspect of the Q2 report will be clear communication on strategy, particularly whether Mr. Werner aims to cut opex (or at least not build a larger opex base) or whether the growth focus, which hurt cash flows, will continue. As of Q1'23, Ecoclime had a cash position of SEK 71m and r12m lease adj. FCF of SEK -54m.

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