Doro
Doro - In the grip of a weak phone market (ABG Sundal Collier)

2019-01-17 20:24
Lowered estimates, on weak phone market
We forecast double-digit growth for Services
Report due 14 February
Multiple profit warnings
Looking at recent retail trends, big European vendors such as Ceconomy (the owner of MediaMarket and Saturn) have issued profit warnings. Home electronics manufacturers, and especially mobile phone makers such as Apple and Samsung, have also warned about sharp sales and earnings declines in Q4. For at least three consecutive quarters, Doro has concurred, highlighting Europe as a sluggish phone market. Although we think that Doro’s Q3 outgoing order book was decent (SEK 410m), we believe it was largely inflated by FX. If we adjust for currency, our calculations imply continued negative organic growth within Products.

Est. changes: lowered Product sales and gross margins
We find it plausible that Q3 Product sales were affected by the launch of the Doro 7050, given that resellers generally increase their inventory pre-launch. In light of the above-mentioned factors, we have chosen to lower our projections going forward. We had previously believed in a more stabilised market for Q4’18e and ’19e-’20e. For Services, our belief in double-digit organic growth remains intact. We estimate sales of SEK 84m in Services for Q4’18e (16% organic like-for-like growth). After reviewing the company’s costs (especially for COGS and D&A), however, we have cut our EBIT projections for ’18e-’20e by 7-11%. For COGS, we believe that the recent USD/EUR trend is contracting margins.

+2.5% sales growth for ’19e, share trades at c. 6.8x EV/EBIT
Our non-adjusted EBIT forecast for ’18e is SEK 119m, in line with Doro’s guidance for EBIT of SEK 105m-135m. On our revised estimates, Doro’s share trades at 6.8x EV/EBIT for ’19e.


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