CTT Systems - Negative EBIT as topline remains weak
Sales of SEK 35m vs. ABGSCe 37m, negative EBIT 2021 guidance: lower OEM, AM above 2019 levels Continued challenging environment until H2’21 Q4 results Earnings continue to be heavily affected by the pandemic. Sales arrived at SEK 35m (-6% vs. ABGSCe 37m), -54% y-o-y organically (ABGSCe -47%), with a ~70% and ~50% decline in the OEM and Aftermarket segments, respectively.
Adj. EBIT dropped to below 0 and reached SEK -4m (vs. ABGSCe 5m), for a margin of -11% (ABGSCe 13%).
For Q1’21, CTT guides for sales of SEK 30-35m, an implicit decline of 55-60% y-o-y. According to the CEO, aftermarket sales would have been SEK 10m higher if sales had matched underlying demand (excl. inventory adjustments).
2020 DPS amounted to SEK 1. 74 (ABGSCe 1. 85).
Outlook and estimate changes For 2021, the CEO guides for OEM revenues to be well below 2020 levels and that it will take “several years” before OEM returns to 2019 levels (as expected in our view). On the aftermarket, the CEO expects a gradual return during 2021 and that AM revenues should reach pre-COVID levels by the end of the year, implying a yearly run-rate of SEK 150m. In addition, the company is increasingly focused on gaining traction in the new VIP segment from 2022 and onwards, that could potentially generate SEK 200m in yearly revenues.
Due to the continued production rate adjustments, and the company’s guidance, we believe this implicitly points to 2021 adj. EBIT downgrades of 10-15%. Final thoughts CTT continues to be in a very challenging demand environment.
However, the balance sheet is still strong and the gradual return in aftermarket revenues should provide a positive mix to earnings. The CTT stock is up 30% L3M, vs. the Carnegie Smallcap index at 11% and is now trading on (pre-Q4) 14x EV/EBIT ‘22e.
~50% lower than our selection of Nordic IT/medtech peers. There is a conference call/webcast at 09:30 CET, dial-in: SE +46 8 505 583 57, UK +44 333 300 9032, weblink: https://tv. streamfabriken.
com/ctt-systems-.
