Net sales amounted to SEK56m, 9% below our expectations, primarily due to lower revenues in SDD. The decline is also in line with management’s strategy of focusing more on its higher-margin business in SDS. In terms of profitability, margins held up impressively, and EBITDA margin increased from 27% in Q4 to 40% in Q1. EBITDA amounted to SEK22m, compared to our estimate of SEK17m, and EBIT landed at SEK10m compared to our estimate of SEK8m.

Although FX provided some boost to margins, the underlying margins remained strong due to solid cost control and revenue mix. With the acceleration of the decline in SDD sales in recent quarters, the positive impact of the revenue mix should be evident in the P&L throughout 2024, particularly in Q2 and Q3. Additionally, the company foresees the potential for further cost savings ahead, which should support margins in the coming quarters.

Following the report, we have made a downward sales revision due to reduced sales in SDD, lowering sales by 8% in 2024e and 8-7% in 2025e-2026e. However, we have also slightly increased our margin assumptions, primarily due to the lower underlying opex in the quarter and the expected continued positive revenue mix going forward. Although SDS delivered a solid quarter, the primary focus remains on cash flow and the maturity of existing bonds in May 2025. We leave our valuation unchanged and our base case stands at SEK16, and the fair value range is SEK6-27.