Energy Save’s Q3 report was largely in line with our estimate on the top line, but higher-than-expected costs caused the EBIT to come in below our estimates. Net sales came in at SEK50.3m (SEK87.4m) versus our estimate of SEK55.7m. This represented a 42% y/y decline but 51% q/q growth, where we consider the latter to be thanks to Aira-sales. The gross margin amounted to 27.0% (31.5%) versus our estimate of 31.0%, a deviation explained by a large degree of direct deliveries taking place in the quarter (which typically has a relatively lower margin but higher volume). OPEX amounted to SEK-17.4m (SEK-11.8m) vs our estimate of SEK-15.6m. The deviation from our estimates stems from higher costs related to the Aira partnership and increased product development. All in all, EBIT amounted to SEK-7.4m (SEK14.3m) versus our estimate of SEK0m.

The European heat pump market has been very challenging in the recent two quarters, although depending on geographic market, some have come further in subsidy schemes. Total heat pump sales in 2023 were down y/y, where Q3 and Q4 were particularly slower. Therefore, we consider Energy Save’s sequential growth for the second quarter in a row very positive. We believe that the Aira partnership is the driver of this, and we expect Aira to continue to drive sales growth in the coming quarters, where the UK and Germany (Aira's key markets) have relatively favourable market fundamentals thanks to its subsidy schemes.

We slightly reduce our sales forecast going forward on the back of the weakening near-term market fundamentals in recent quarters. However, we are very positive that the Aira partnership has started to generate significant sales figures. Therefore, we feel increasingly confident in our sales figures for the coming quarters, combined with the relatively “healthy” markets (in the short term) in which Aira is active. However, should near-term market fundamentals deteriorate further, there is a further risk to these estimates. We also slightly reduce our gross margin assumptions going forward and increase the expected OPEX base. All in all, our fair value range is reduced to SEK30(50)-SEK140(160) with a base case of SEK65(90) per share.