SinterCast: Double headwinds in H2, but strong pipeline - ABG

- Q3e: EEs 3.5m (4.2m), sales SEK 30m (40m), EBIT 38.8% (41.3%)
- Double headwinds from programme shutdown and weak automotive
- Medium-term more promising, strong installation pipe and prod. ramp

Q3 expectations
Q3 engine equivalent production has been pre-announced at 3.5m (4.2m). We estimate total sales will come in at SEK 30m (40m). This is down 26% y-o-y (-24% organic), albeit vs. record-high comps, as series production suffers from longer-than-usual summer shutdowns among customers alongside the 0.5m EE programme that reached end-of-life in September. Despite this, we expect that the adj. EBIT margin will hold up fairly well at 38.8% (41.3%), supported by a SEK 1.9m positive FX effect on opex.

Estimate changes
We reduce '24e adj. EBIT by 10% on lower series production sales due to the double headwinds of the end-of-life programme and a weaker automotive sector, but raise '25e-'26e by 4-2%, mainly driven by FX. Despite the near-term headwinds, the medium-term looks promising, with several production programmes ramping, and a strong installation pipeline. During the quarter, SinterCast announced a SEK 3.6m Ladle Tracker order from a major international commercial vehicle manufacturer, as well as a System 4000 order from Maringá Soldas. We expect revenue for these to be recognised in Q4.

Valuation
With the share trading at 26-16x '24e-'26e P/E, we maintain our fair value range of SEK 115-145, based on historical P/E multiples and our DCF valuation, which we think are the most appropriate valuation methods for SinterCast.

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