Ovzon - Ramping costs now for bigger wins later

• Strong sales figure, but EBIT shortfall on rising opex
• We cut '26e/'27e/'28e EBIT by 9%/2%/1% due to higher costs
• Order activity has recently increased, 15x '26e EV/EBIT

Q2 sales in line, but higher costs than expected

Q2 sales broadly met our top line (-1%), growing 48% y-o-y on recent contract wins. Margins were weaker than expected, with EBIT -31% vs. our forecast and -28% vs. Modular Finance consensus. The deviation was from 1) SEK 6m NRIs tied to COGS periodisation from Q1, and 2) a ramp-up in growth-related costs, with FTEs up 5 q-o-q, to 49. We were positively surprised by Q1's strong margins and had extrapolated that level; smoothing the SEK 6m across both quarters shows a more stable picture. The FTE growth is short-term negative, but we remain positive about demand and view it as the right investment.

We lower our margin assumptions

SATCOM demand remains high, though Ovzon's order activity was slow through H1. More recently, however, activity has picked up, which bodes well for H2e. One might ask why Ovzon keeps signing leased-capacity orders while holding spare capacity on its proprietary satellite Ovzon-3 (~90% gross margin vs. ~65% for leased), but this reflects the company pursuing even more accretive wins, which we think it will land. Visibility into large wins remains limited, though we argue that progress is being made. We increase our terminal sales assumptions on recent contracts, while raising opex assumptions due to the reasons above. Net, we cut '26e by 9%, '27e by 2% and '28e by 1%.

15x-12x 2026e-2027e EV/EBIT

Modern warfare increasingly spans domains where satellite connectivity is mission-critical, driving a structural, multi-year uplift in space investment. Ovzon is well-positioned to capture this demand given its specialisation in high-resilience, high-throughput SATCOM solutions. The stock is trading at 15x-12x '26e-'27e EV/EBIT.