EBIT SEK 25m -4% y-o-y (-3% vs. ABGSCe)

Estimates slightly lower, burdened by E-mobility

Share trading >30x on ‘20e EV/EBIT

Sales growth 4% but EBIT-margin down 110bp y-o-y
GARO’s Q4 was broadly in line with our expectations. Sales were SEK 278m (-3% vs. ABGSCe 287m), up 4% y-o-y (4% organic, 0% FX). Growth was mainly attributable to E-mobility (23% of group), which expanded by 21% (ABGSCe 20%). Electrical Distribution Products (49% of group) declined by 5%. Temporary Power grew 7% following two quarters of negative growth. EBIT was SEK 36m (-3% vs. ABGSCe SEK 37m) on a margin of 12.9% (ABGSCe 12.9%), -110bp vs. Q4’18. Margins continue to decline y-o-y as investments in market presence and E-mobility sales have burdened the group for the last three quarters. Net income for the period was SEK 23m (ABGSCe 28m), down 4% y-o-y.

Estimates slightly lowered on continued margin pressure
We lower sales only slightly on the weaker than expected Q4’19, on margins we expect continued challenges as the group is investing more heavily in E-mobility. We lower EBIT margin estimate for ‘20e and ‘21e by 10bp and 20bp, respectively. The company also announced new product launches with its self-developed fast charger, a wallbox with two outlets and a software solution called G-Cloud. While we expect that the group will be able to grow the E-mobility segment both domestically and abroad, we estimate that continued sales and marketing costs will burden the overall profitability. For more information regarding the EV-charging market and valuation assumptions, see our in-depth report from 11 November 2019.

Share currently trading at 31x ’20e EV/EBITA
GARO’s share price has increased >100% over the past 12 months, moving from 15x EV/EBITA to around 30x. While the share is a good way for investors to gain exposure to the roll-out of EV-charging infrastructure, E-Mobility is still only 23% of the group (’19).

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