Doro - Expecting more public procurement wins
Sales -21% y-o-y but adj. EBIT increased 21% y-o-y We reduce ’21e-‘23e EBIT by 5-3% Doro expects Care to be spun off in Q4’21 Newly won procurements bode well for the future Similar to the last quarter, Doro reported sales in line with our forecast while EBIT was above. Sales declined 21% y-o-y, with Phones reporting -27% organic growth (ABGSCe -26%) due to the pandemic, while the corresponding metric for Care was +0. 4% y-o-y (ABGSCe +1.
6%). Gross margins were strong at 37. 7% (vs.
33. 7% in Q1’20), driven by a good sales mix (mainly in terms of geographies) as well as FX. Despite the sharp sales decline, adj.
EBIT grew 21% y-o-y, driven by the strong gross margins together with Doro’s cost savings, which are now almost fully implemented. In Care, the number of subscribers declined by 2,600 organically q-o-q due to some lost contracts in the Nordics. While we remain cautious for Norway, the outlook for Sweden looks good as Doro has recently won several new procurements that should bear fruit.
We believe that Doro’s recent success in Sweden is partly because its competitor, Tunstall, had devastating operational issues in H2’20 leading to its exclusion in some public framework agreements. Slightly lowered sales assumptions We keep our Care sales forecasts largely intact but cut our ’21e-‘23e for Phones sales by 2%, due to a slightly more cautious view on volumes ahead. This leads to a 5-3% cut on our ’21e-‘23e EBIT.
Although we believe that the industry’s recent supply chain issues had a low impact on Q1 financials, we think this will be a drag on gross margins in Q2, but at the same time, we continue to see a tailwind from FX. 11x 2021e EV/EBIT, 2019-2023e EBIT CAGR of 8% The preparations for the separate listing of Doro Care are moving forward and the process is expected to be completed in Q4’21. We remain positive on the news given the lack of synergies between the two businesses.
On our new 2021 forecasts, Doro’s share is trading at 11x EV/EBIT and a P/.
