Generic - Broadening verticals lift the mix

• Volume growth in coming quarters
• Growing verticals will likely add some costs
• EV/EBIT of 10x '26e and 9x '27e

Likely past the bottom of the cycle

Volumes came in above our expectations. The Messaging segment (SMS, RCS, SenderID), Generic's largest at 73% of sales, grew 9% y-o-y to SEK 36m. While volumes are recovering, parts of the market, such as logistics, will likely remain cautious near term. However, Generic continues to win customers in less cyclical verticals such as e-health, which we expect to gradually shift the revenue mix towards more stable growth. Taken together, we think the bottom of the cycle is now behind us. Looking further out, we see Digital products (DOCS, fax) as the most important growth driver. Digital products has already penetrated over 30% of Swedish municipalities, and the division is now broadening into regions, authorities, and private companies, which we expect to lift both recurring revenues and gross margins.

Expecting some added costs from expansion

We trim EBIT by 2-4% for '26e-'28e on the back of the report. As Generic grows and expands its product mix, we expect some added costs from recruitment and other growth investments. We expect 8% sales growth in '26e, resulting in an EBIT of SEK 41m, a margin of 21%.

Trading 60% below peers

The sector has been affected over the past few years by increased pricing from telecom operators, which has hurt gross margins. Despite this, the company is gradually increasing gross margin by broadening its product mix, and has delivered a 95% cash conversion over the past five years. Generic still operates with only 22 employees, corresponding to ~SEK 9m in revenue per employee, one of the highest rates in the Swedish tech sector. The stock is currently trading at 10x EV/EBIT on '26e, and 9x on '27e, ~60% below peers.