SinterCast - A record year - ABG

Revenue in line, EBIT deviation nothing to worry about
SinterCast delivered Q4 revenues of SEK 32.9m, up 11% y-o-y, with annualised engine equivalents coming in at 3.5m, up 13% y-o-y. This was in line with our estimates. Higher-than-anticipated equipment sales of SEK 2.1m contributed to a lower gross margin of 68%, compared to recent quarters. EBIT amounted to SEK 8m, resulting in a margin of 24% (26%). This fell short of our estimate of SEK 10.7m for three reasons: firstly, the lower gross margin (SEK -1.6m), secondly, higher than provisioned for employee incentive payments as a result of higher revenue (SEK -1.6m) and finally, FX revaluations of customer receivables and forward contracts (SEK 0.5m). Starting in Q4 an accounting change was made, causing revaluation of forward contracts to now be reported under other operating income/expenses instead of under net financials. This will reduce EBIT volatility in case of a continued volatile USD/SEK rate. Management highlighted the year-end upturn in installation activity, citing the commissioning of a new Ladle Tracker at the Teksid foundry, as well as a mini-system installation at the Dongya foundry.

Expect equipment sales to return to historical levels
For '23e-'24e we increase our revenue estimates by 4-2% on FX. For '25e we estimate revenue of SEK 188m, growing 11% y-o-y. We also raise our '23e-'24e EBIT by 5-1%, and estimate '25e EBIT of SEK 67m for a margin of 36%. We anticipate that equipment sales will return to their historical average of SEK 8m per year, supported by management's guidance that several discussions are at a mature stage and should result in such a return.

16x '23e EV/EBIT, fair value range SEK 100-175
The share is currently trading at 16x '23e EV/EBIT, with a div. yield of 7-9% in '23e-'25e. We reiterate our fair value range of SEK 100-175.

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