Doro - Not yet out of the woods

COVID-19 continues to hamper Phones sales We lower our growth assumptions for Phones 10x 2021e EV/EBIT, ~13% ROIC for ’21-’23e COVID-19 continues to weigh on Doro’s sales Doro’s Q4 report is due 29 April at 08:00 CET. We expect sales of SEK 347m, -18% y-o-y organically, as we believe that the ongoing pandemic continues to take its toll on Doro’s Phone sales. We forecast Phones sales of SEK 203m (-26% organic y-o-y) and Care sales of SEK 144m (+2% organic y-o-y). Although we expect positive FX effects on Phones gross margins (similar to last quarter), these are largely offset by the fact that that freight rates remain elevated, while the supply chain’s recent issues in terms of component shortages causes increased costs.

Nevertheless, we expect Doro’s cost-savings programme to continue to support margin; we forecast Q1 adj. EBIT of SEK 15m, -2% y-o-y, for a margin of 4. 3%.

Negative est. revisions for Phones, but Care est. We lower our sales estimates by 3-2% for ’21e-‘23e due to lowered growth assumptions for Phones.

We leave our Care forecasts largely unchanged. In total, this drives -6% to -2% adj. EBIT revisions for the same forecast period.

We now forecast 2021 sales of SEK 1,631m (-4% y-o-y), with adj. EBIT of SEK 139m (+37% y-o-y) for a margin of 8. 5%.

We expect Phones sales to remain muted in H1’21e, but that a small rebound will occur in H2’20e amid Doro capitalising on pent-up demand as societies start to reopen. We are encouraged by the spinout announcement Doro’s share has appreciated 24% since the company announced that it seeks to spin out the Care division. Clearly, the market is encouraged by the decision, and so are we, as we believe that it will enhance the company’s growth outlook; in terms of both organic and inorganic opportunities.

The European telecare market remains fragmented, which is beneficial for Doro as it has an active M&A agenda. On our new 2021 estimates and at the current share price, the Doro share is trading at c. 10x E.