SinterCast - A turning point

• Q1 exceeded our expectations, but limited estimate revisions
• Confirms that Q4 was likely the series production trough
• Programme ramp-up and stabilising market support recovery

Q1 results

SinterCast delivered a reassuring Q1 as Engine Equivalent production returned to y-o-y growth for the first time in 15 months in March, driving quarterly EEs to 3.0m (3.1m), above our 2.8m. This in turn drove sales of SEK 25m, down 8% y-o-y but 8% above our estimate, which, coupled with less unfavourable FX hedge revaluations than we expected, enabled the EBIT margin to reach 25% (37%), 7pp above our estimate.

Estimate changes

While Q1 exceeded our expectations, we had already pencilled in a fairly substantial Engine Equivalent production recovery throughout the year, supported by ramp-up of new production programmes and a stabilising automotive market, and we therefore only make limited revisions to our estimates, raising adj. EBIT by 4%/1%/1% in '26e/'27e/'28e.

Outlook and valuation

We believe Q1 marks a turning point for series production after the Q4 trough, which is in line with the company's guidance. Longer-term, the company reiterated its target of reaching the 8m Engine Equivalent milestone in '31, supported by four commercial vehicle programmes scheduled to start production in '26-'27 and '30, and specified that this should result in revenues well in excess of SEK 200m. While the long lead times of these types of programmes give the company good visibility on future volumes, they do come with significant timing uncertainty, which is why we, for now, keep a somewhat more conservative expectation of around SEK 200m in sales by '31. Meanwhile, we believe the company's case that the internal combustion engine will still dominate SinterCast's end markets by 2050 is gaining traction as several OEMs have scaled back their electrification plans and investments over the past year. The share is now trading at 21x-14x '26e-'28e P/E, vs. its historical median of 22x-15x.