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Q1 resultsThe earnings-growth trend that started in Q3 accelerated in Q1. Sales were up 37% y-o-y (11% M&A), while the book-to-bill stayed at a very healthy 1.1x. With the adj. EBITA margin expanding to 7.0% (4.8%), earnings more than doubled y-o-y, beating our estimate by 10%. Management attributed the strong growth to increased momentum in the defence, data centre, and quantum computing end markets. Importantly, Inission Power (Enedo) demonstrated strong growth, a great book-to-bill of 1.3x, and decent profitability of 3.1% (-2.8%), which is the first time since Q3'24 that it reached this margin on an unadjusted basis. Estimate changesThe earnings beat and surprisingly persistent order intake momentum drive us to raise '26e-'28e adj. EBITA by 5%. This puts us above the high end of the company's guidance range for '26 (SEK 2.3-2.5bn sales, >6% EBITA margin), but we think this is warranted given the strong start to the year and management's indication during the earnings call that the guidance is on the conservative side. Outlook and valuationManagement said that the raised geopolitical uncertainty does not seem to have curbed the budding macroeconomic recovery; it has, however, impacted the component market, but the company is working with its suppliers to mitigate this. Given the recent order intake, the company sees good chances for the strong start of the year to persist throughout '26, as do we. M&A remains an active part of the strategy, with some processes making progress during the quarter, and we view an acquisition this year as likely, which would boost growth further. The company is also in discussions with several potential customers for the Tunis factory, something that should further help earnings in the medium term. The share is trading at 14-10x the '26e-'28e P/Es, vs. Nordic peers at 17-14x. |