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Better OEM activity, uncertain flight traffic2026 started well for CTT, with 41% organic growth (ABGSCe +29%), sequential growth in both OEM and aftermarket (AM) sales, and normalised inventories among distributors. Key drivers for CTT are the increase in aircraft production rates and higher content per aircraft. Both of these factors are now materialising, which should drive >70% organic growth y-o-y in OEM sales for the upcoming quarters, and ~55% growth FY'26. However, flight cancellations due to the Middle Eastern conflict will likely hurt AM sales . Global traffic remained stable y-o-y in April, and CTT's products are mainly on the most fuel efficient and profitable (long-haul) aircraft, but CTT still views this as a risk, which is why we forecast declining earnings again in Q2, before a return to >40% growth from Q3. Our view for 2027-2028 remains largely intact on the back of 1) higher production rates, 2) increased penetration and 3) growth in the installed base. Return to earnings growth in Q3'26eWe lower '26e EBIT by 12% to factor in an AM business that is affected by flight cancellations, and a slower OEM ramp-up. Our '27e EBIT is down only 4% though, as we believe the visibility from increased production rates, a rebound in air travel and postponed VIP sales should still support solid earnings. This should in turn drive a ~35% organic sales CAGR and a ~60% EBIT CAGR in '25-'28e. Multi-year double-digit growth potentialDespite seeing tougher headwinds than we had previously anticipated, CTT's core strengths remain: the company benefits from a near-monopolistic position, strong demand, and its margin-accretive AM business. This should drive long-term double-digit earnings growth, while the share is now trading at 20-11x EBIT '26e-'27e (23x L10Y), offering 3-6% dividend yields and ~25-40% ROCE. |