Transtema has reached its current long-term EBITA margin target of above 5% only one quarter after it was set in Q4 2020 (TTM adjusted EBITA margin of 6%). This is despite being in the early stages of ramping up large contracts which we thought would have burdened profitability. We believe that management has done a fantastic job in turning the business around over the past few years, and that it will continue to improve profitability and deliver on its growth initiatives. We expect EBITA growth of 74% in 2021 and believe there could be upside if Transtema were to gain traction in 5G. The share is now trading at 8x 2021E EV/EBITA (a ~43% discount versus peers), whereas our valuation range implies 8-10x. We raise our DCF-based fair value range to SEK 19.5-23.7 (14.3-17.4). Marketing material commissioned by Transtema Group AB.

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