Q3 report due on Wednesday, 3 November

Revisions to series production and installation revenues

Trading at 17x ’22e EV/EBIT, 4-8% div. yield ’21e-’23e

Q3: engine equivalents consistently at 3 million or more
We expect Q3 sales of SEK 27m, up 39% y-o-y (41% org, -2% FX). According to a company press release, annualised engine equivalents were 3.2m (2.8m in Q3’20, 3.2m in Q2’21) which is impressive considering the current production stops across the automotive industry due to component shortages. Moreover, the negative FX effects seen in H1’21 should be less of a factor in Q3 due to the recent appreciation of the USD/SEK rate. We expect sampling cup volumes to increase 40% y-o-y versus abnormally low levels in Q3’20. However, sampling cup volumes should decrease sequentially, as we saw a spike in Q2’21, meaning that customers’ inventories are likely stocked up. The now-stable annualised engine equivalent volumes (seven straight months at 3 million or above) indicate that most of the uncertainties of the previous 18 months are behind us. Due to SinterCast’s highly scalable business model, we expect topline growth to have a significant drop-through to EBIT, leading to EBIT of SEK 7m and a margin of 27% (19%).

Slight revisions to series production and installations
Although the Q3 engine equivalent volumes signal a positive development, they are slightly below what we had expected, which combined with somewhat lowered gross margin estimates leads us to lower our ’21 EBIT estimates by 14% (SEK -5m). We also move some installation revenues from H2’21e into ’22e, which raises ’22e EBIT by 3% (SEK 2m).

Trading at 17x ’22e EV/EBIT, 4-8% div. yield ’21e-’23e
On our estimates the share is currently trading at 17x ’22e EV/EBIT, offering 4-8% dividend yields for ’21e-’23e. Meanwhile, we see SinterCast generating a 46% ’20-’23e EBIT CAGR thanks to the inherent scalability of its licensing and production fee model, with the EBIT margin going from 23% in ’20 to 41% in ’23e. Finally, due to
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