<a id="bm-comp-2786bc96-8894-48be-9ad2-c2e2e9880e61" name="bm-comp-2786bc96-8894-48be-9ad2-c2e2e9880e61" class="BMCustomAnchor"></a><table><tr><td bm-component-id="2786bc96-8894-48be-9ad2-c2e2e9880e61" style="vertical-align: top; width:100.000000%;"><ul><li>Sales of SEK 49m -38% q-o-q, EBIT back to negative at SEK -8m</li><li>We lower FY'24/25e-FY'26/27e sales by 30-4%</li><li>Aira sales on track, waiting for ramp-up of other OEM partnerships</li></ul></td></tr></table><a id="bm-comp-18a16c49-ebfb-4f23-966c-317ed31898b3" name="bm-comp-18a16c49-ebfb-4f23-966c-317ed31898b3" class="BMCustomAnchor"></a><table><tr><td bm-component-id="18a16c49-ebfb-4f23-966c-317ed31898b3" style="vertical-align: top; width:100.000000%;"><h3 class="bm-h3">Q2: A pause in the improving sales trend</h3><p>Q2'24/25 sales declined 38% q-o-q to SEK 49m (ABGSCe 79m), but were still up 46% y-o-y. Sales were driven by deliveries to Aira (we estimate ~90% of sales), as ES-branded sales remained subdued. In addition, we fear that inventory adjustments and a slower-than-expected market recovery will result in stable sales q-o-q until Q4'24/25, but a 2-13% y-o-y decline in fiscal Q3-Q4, before returning to y-o-y growth in mid-2025. On a positive note, we believe that improving end-market activity in key regions recently and the good sales activity at Aira (sales of ~SEK 100m) should support a return to growth. EBIT was SEK -8m (ABGSCe +1m), vs. SEK +0.3m in Q1, and we do not expect a return to profitability until volumes start to improve. We find it positive to see that inventory declined further, and we estimate that ES' ~SEK 48m cash balance will be enough until FCF turns positive in late FY'25/26e (-7m in Q2).</p><h3 class="bm-h3">Setback in improvement, outlook updated</h3><p>We lower FY'24/25e-'25/26e sales by ~30-10% ('26/27e down 4%) following the lower-than-expected Q2 results, slower market recovery and updated outlook. This in turn results in a FY'24/25e EBIT loss of SEK 12m, which improves to SEK +14m in FY'25/26e, for a 4% margin (we had +3-18m previously, 5% margin '25/26e). We now forecast ~55-30% sales growth and 4-7% EBIT margins in FY'25/26e-'26/27e.</p><h3 class="bm-h3">Profitable growth potential remains when market recovers</h3><p>Once ES' margins turn positive again in FY'25/26e, we believe the company has a good position to capitalise on the structurally growing heat pump market and should be able to deliver double-digit margins in the long term. On our estimates, ES is trading at 0.6x EV/Sales '24/25e and 10-4x EBIT '25/26e-'26/27e, ~30-80% below Cleantech and HVAC peers. We update our fair value range to SEK 25-76 (27-76).</p></td></tr></table>