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CTT Systems - One step forward, one step back

21 juli 2025

<a id="bm-comp-4b75cd44-9a45-4611-a389-029fc1729a5e" name="bm-comp-4b75cd44-9a45-4611-a389-029fc1729a5e" class="BMCustomAnchor"></a><table><tr><td bm-component-id="4b75cd44-9a45-4611-a389-029fc1729a5e" style="vertical-align: top; width:100.000000%;"><ul><li>Good uptick in Q2, but slowdown again in Q3</li><li>'25e-'27e EBIT down 23-3%; 20% EBIT CAGR '24-'27e</li><li>36-14x EBIT '25e-'27e, ~20-50% ROCE, net cash</li></ul></td></tr></table><a id="bm-comp-71efd9dd-f79c-4893-9615-e457b553743c" name="bm-comp-71efd9dd-f79c-4893-9615-e457b553743c" class="BMCustomAnchor"></a><table><tr><td bm-component-id="71efd9dd-f79c-4893-9615-e457b553743c" style="vertical-align: top; width:100.000000%;"><h3 class="bm-h3" style="text-align:left;">OEM challenges delay ramp-up, again</h3><p>CTT continues to suffer from supply chain challenges at its customers. Q2 sales were in the middle of CTT's guidance (SEK 80m vs. 75-85m, +2% vs. ABGSCe) and grew 7% organically. However, despite the positive trend in production rates (Boeing is at ~7 per month for the B787, Airbus' A350 is at ~6 per month), we understand that a reluctance to build inventory among OEMs will hold back sales for CTT to a greater extent than previously expected. Thus, we believe the Q3 guidance of SEK 70-80m sales (we have 78m, 42% organic growth) mainly reflects short-term supply chain difficulties, as &gt;60% higher planned production rates as well as increased content per aircraft should support a significant OEM acceleration from Q1'26e. The slower ramp-up, together with FX headwinds, will also hold back margins, but CTT should still achieve ~30% EBIT margins in Q3-Q4 and deliver earnings growth in Q3 (although lower earnings y-o-y in Q4).</p><h3 class="bm-h3" style="text-align:left;">Production rates are picking up, though</h3><p style="text-align:justify;">We lower '25e-'27e EBIT by 23-3% due to lower sales on a fairly intact cost base, and now expect CTT to grow 7% organically in 2025, but see adj. EBIT declining by 33% y-o-y due to FX and mix headwinds. From 2026, on the other hand, the combination of accelerated OEM sales and a recovering aftermarket business should drive ~50-40% organic sales growth and ~70-50% EBIT growth (20% adj. EBIT CAGR '24-'27e) while delivering ~30% EBIT margins.</p><h3 class="bm-h3">Double-digit growth potential from 2026e</h3><p>The core strengths of CTT remain: the company benefits from a near-monopolistic market position, strong demand, and its margin-accretive AM business. This should drive long-term double-digit earnings growth, while the share is now trading at 36/21/14x EBIT '25e-'27e (22x L10Y), offers 3-6% dividend yields '25e-'27e (&gt;90% payout), and ~20-50% ROCE.</p></td></tr></table>

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