• Sales -5%, adj. EBIT +16% vs. ABGSCe, +5% org. sales
• Guides for Q2 sales growth of ~11%, could lift ets. 1-3% (ex FX)
• Slightly more cautious than expected, share has been strong YTD

Q1 details

Strong profitability while sales came in below CTT's own forecasts. Sales grew 5% organically (ABGSCe +10%) to SEK 78m (-5% vs. ABGSCe 83m), mainly driven by a decline y-o-y in system sales as the aftermarket business continued to grow well (+20% y-o-y, 0% vs. ABGSCe). Adj. EBIT grew 28% y-o-y to SEK 33m (+16% vs. ABGSCe 28m), for a margin of 42% (ABGSCe 34%, 34% Q1'23) due to the higher share of aftermarket sales. Free cash flow was also solid at ~25m. According to the CEO, Q1 sales were negatively affected by delayed shipments, which should be recuperated already in Q2. For Q2, CTT guides for revenues of SEK 85-90m, with the mid-point implying 11% growth y-o-y, and -6% vs. ABGSCe 93m, driven by flat OEM sales q-o-q, no VIP sales and continued good aftermarket demand. On outlook, the CEO states that aftermarket growth should be "significantly lower" in 2024 vs. 2023 (we have +9% vs. +30%) while OEM sales should pick up due to increased production rates, while penetration has also improved on the A350. On the retrofit and VIP side, opportunities remain but that lead times mean this will likely first materialise towards late 2024 / early 2025.

Estimate changes

Mechanically, the Q1 EBIT beat vs. ABGSCe, and slightly lower Q2 sales would impact our FY'24e EBIT by 1-3% positively (excl. FX). Our OEM ramp-up assumptions should match the expected increase in production while H2 VIP sales could be somewhat at risk.

Share price view

Another strong report in terms of earnings, although sales growth for both Q1 and Q2 were below our expectations. The share has performed roughly in line with the market into numbers (-2% vs. OMSGI -3%), but strongly YTD (+39% vs. +4%) and is trading at 28-18x EBIT '24e-'26e, ~10% above its 5Y average. We believe we could see a slight negative reaction on the day,