<a id="bm-comp-860554c7-9da1-4b65-8fc6-2154985f9b92" name="bm-comp-860554c7-9da1-4b65-8fc6-2154985f9b92" class="BMCustomAnchor"></a><table><tr><td bm-component-id="860554c7-9da1-4b65-8fc6-2154985f9b92" style="vertical-align: top; width:100.000000%;"><ul><li>Sales SEK 49m (ABGSCe 79m), EBIT -8m (ABGSCe +1m)</li><li>Slower recovery, flat sales expected in future quarters</li><li>Aira the sales driver, but negative to see a pause in the recovery</li></ul></td></tr></table><a id="bm-comp-ac8d6b2c-535e-44d2-8fda-33b5f6167931" name="bm-comp-ac8d6b2c-535e-44d2-8fda-33b5f6167931" class="BMCustomAnchor"></a><table><tr><td bm-component-id="ac8d6b2c-535e-44d2-8fda-33b5f6167931" style="vertical-align: top; width:100.000000%;"><h3 class="bm-h3">Q2: Sales down q-o-q and EBIT back in negative territory</h3><p>Energy Save reported lower-than-expected Q2 sales of SEK 49m (-38% vs. ABGSCe SEK 79m), up 46% y-o-y but down 38% q-o-q from 79m. Thus, the continued sequential uptick in sales that we have seen since Q1'23/24 has now been halted, which ES says is due to inventory adjustments in the OEM channel and declining sales in Scandinavia. The gross margin was 33% (ABGSCe 27%), vs. 45% LY and <font color="#000000">EBIT came in at SEK -8m</font> (ABGSCe SEK 1m), for a margin of -16% (ABGSCe 1%). Costs were SEK 5.2m higher than the previous quarter and the CEO writes that parts of this (SEK 2m) were due to Energy Save's participation in the large European trade exhibition Chillventa, in connection with the launch of its R290-series heat pump. <font color="#000000">Residential sales continued to be the main sales driver at SEK 44m (vs. ABGSCe 74m) but was down 40% q-o-q</font>. Although ES had a ~5m positive working capital release, FCF still weakened to -7m (-0.4m in Q1'24/25) due to lower earnings and increased investments. The cash balance came in at SEK 48m, vs. 51m in the prior quarter.</p><h3 class="bm-h3">Estimate changes and outlook</h3><p>Looking ahead, management says that the market and end-market recovery in the residential market is much slower than expected. Sales in Scandinavia were down to SEK 1m, ~3% of total sales, indicating that sales under the ES brand are weaker and that sales are solely driven by OEM deliveries to Aira. In addition, the CEO expects sales in future quarters to remain at current levels, before gradually improving in 2025 (we had assumed ~80m for calendar Q4'24 and Q1'25). Thus, we believe that the updated outlook could mechanically lower our FY'24/25e sales by ~30% and put EBIT in negative territory (we currently have +3m), while FY'25/26e sales could come down by 10-15%, with a slightly higher impact on EBIT.</p><h3 class="bm-h3">Valuation</h3><p>Prior to today's report, the share was up 2% L3M and is on our pre-Q2/'24/25 estimates trading at 0.5x-0.4x EV/Sales '24/'25e and 9x-4x EBIT '25/'26e-'26/'27e. However, given the halt in sequential growth, outlook expecting this to remain in future quarters and increased losses, we would expect a negative reaction on the day (currently down 16%).</p></td></tr></table><a id="bm-comp-2d4db7c7-57f1-4d7b-b6c6-87225471ccbc" name="bm-comp-2d4db7c7-57f1-4d7b-b6c6-87225471ccbc" class="BMCustomAnchor"></a><table><tr><td bm-component-id="2d4db7c7-57f1-4d7b-b6c6-87225471ccbc" style="vertical-align: top; width:100.000000%;"><table id="bm-img-0c3a6b0e-f8db-4ca8-bd98-a1c09044be65" class="bm-img-table xslt-img-empty xslt-img-include"><tr><td class="xslt-img-caption">Outcome vs. expectations</td></tr><tr><td><img bm-img-encrypt="0c3a6b0e-f8db-4ca8-bd98-a1c09044be65" bm-img-original-height="590" bm-img-original-width="702" bm-img-svg="image:image_upload/83643_e45c56f2-d510-4391-9ae7-ad04f755de8e.svg" bm-img-width-hint="96.56%" id="bm-id-0c3a6b0e-f8db-4ca8-bd98-a1c09044be65" src="https://abgsc.bluematrix.com/images/image_upload/83643_e45c56f2-d510-4391-9ae7-ad04f755de8e_702.png" svg="/nas/web/clients/abgsc/images/image_upload/83643_e45c56f2-d510-4391-9ae7-ad04f755de8e.svg" width="702" alt="" title="" /></td></tr><tr><td class="xslt-img-source">Source: ABG Sundal Collier, company data</td></tr></table></td></tr></table>