AVTECH: Clear pick in a turbulent sector
Rasmus Jacobsson answers the top questions on this Research Update
Research Update
2024-10-28
07:00
Analyst Q&A
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Rasmus Jacobsson will answer the top questions on this Research Update
Ends in 10 hours and 49 minutes
AVTECH delivered another stable quarter, with net sales 3% below expectations due to currency headwinds, while EBITDA was only 1% below. Redeye adjusted its estimates but kept its fair value range. Following a sharp sell-off from the preannouncement (06/10/24), the current EV/EBIT NTM is at the lower end of its three-year range while the pipeline remains as strong as ever.
Rasmus Jacobsson
Mattias Ehrenborg
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Actuals vs outcome
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Expectations were met, but EBITDA was down Q/Q and Y/Y due to organisational investments
Net sales were 3% below RRe. Based on our estimates, the deviation is mainly driven by a weak USDSEK, which decreased by 3% on average Q/Q. Despite the weaker exchange rate, AVTECH’s cost control continues to impress, with EBITDA only 1% below our expectations, although EBITDA was down Q/Q and Y/Y. The main reason for declining EBITDA is the recent organisational investments telegraphed earlier in the year.
Moderate growth assumptions
Our 2025e estimate forecasts SEK 7.5m in incremental sales from the Q3 2024 run-rate of SEK34.4m. This is higher than the SEK3.7m achieved YTD and in line with that achieved in 2023 (only including the price increase of the extended Southwest agreement). We find our estimates reasonable with investments in its salesforce and ongoing trials that may spill over to 2025.
Valuation implies little EBIT growth for 2025e
The stock saw a sharp sell-off from the preannouncement (down -13% since 06/10/24). Hence, Q3’24 annualised AVTECH trades at an EV/EBIT of 20.7x and, based on our 2025e, EV/EBIT of 13.1x, compared to the median 3-year NTM EV/EBIT valuation of 17.0x. Thus, we believe the market expects SEK1m-2m in EBIT growth for 2025e, well below the post-pandemic growth rate. We reiterate our fair value range (SEK3.7-12.1, Base Case SEK6.2 – implied 41% upside to Base Case) and believe AVTECH has a favourable asymmetrical risk profile with each new contract adding to the upside while contract maturities limit the downside.
Key financials
| SEKm | 2022 | 2023 | 2024e | 2025e | 2026e |
| Revenues | 25.0 | 32.2 | 37.6 | 45.5 | 49.7 |
| Revenue Growth | 53.4% | 28.8% | 16.6% | 21.3% | 9.2% |
| EBITDA | 8.9 | 13.4 | 14.1 | 19.7 | 22.6 |
| EBIT | 5.2 | 9.1 | 10.5 | 16.1 | 19.0 |
| EBIT Margin | 24.5% | 33.1% | 30.8% | 38.5% | 41.3% |
| Net Income | 5.2 | 9.1 | 10.7 | 13.2 | 15.6 |
| EV/Sales | 7.1 | 7.3 | 6.4 | 5.0 | 4.4 |
| EV/EBIT | 29.0 | 22.0 | 20.9 | 13.1 | 10.6 |
| P/E | 31.7 | 24.5 | 23.3 | 18.8 | 15.9 |
Actuals vs outcome
Disclosures and disclaimers
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Actuals vs outcome
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