Net sales were down 6.6% y/y to SEK195m. A majority part of the lower sales were explained by lower sales of fixed telephony (a large one-off order in Q1-23). UK and Ireland were particularly strong, up 6% y/y to SEK38m. According to management, the strong sales momentum continued for feature phones in the region. The rest of the regions posted negative growth for different reasons.

Order intake was up to SEK215m, 2.4% from Q1-23. Gross margin came in at 42%, driven by a good product mix. EBIT came in at SEK3.1m, corresponding to an EBIT margin of 2% (2% last year). This was below our estimates of SEK15m. It was higher OPEX in the form of higher sales and administration costs than our estimate. Moreover, new resources in marketing, e-commerce, and product offers, plus additional costs related to the upcoming management change, have been added to the higher OPEX.

Order intake came in at SEK215m in Q1 2024 2% y/y. The LTM order intake inched up to SEK 954m, 7% (5%) y/y, so the positive trend continues.

Overall, the quarter was mixed across regions. In the Nordic region, sales decreased by 9.1% year over year, with the main reason being harder competition from smaller distributors. Western Europe (Frabel) decreased sales by 4.3%. And this decrease is entirely explained by lower fixed telephony. Apart from this, the region had good momentum with increased sales in all channels. Central Europe (Germany being the largest country in the region) lost 20.8% as Doro consciously terminated sales of non-Doro products as the last step before the new structure is in place and the new sales organization start to work. According to management, the migration trend from 2G to 4G has begun in Germany. In the UK and Ireland, sales increased by 6.1%, with good demand for features and smartphones.

Marketing and sales costs were SEK47m in the quarter, which was higher than our estimate of SEK39m. With new products ready to launch (such as the Doro Doorbell, and Hearing buds), Doro will increase investment in advertising and marketing across various digital media channels. Additionally, recent hires have been made within the marketing and sales teams. We estimate Selling expenses for 2024 to SEK201m, compared to SEK188 in 2023. As of today, the new products are a very small part of sales but when we asked the management about their ambition of the future product mix, it mentioned that 10% is a working target. But, it will probably take a few years before the new products will move the needle.

It finally looks like the new structure will be in place during Q2 2024. As we have mentioned before, we believe Germany will be very important in driving growth in the coming years. Today Doro has a much smaller market share in Germany compared to the other of its markets. So, increasing its market share within its core products supported by the underlying migration from to 4G should add to the topline growth. Germany is a very conservative market, and we do not believe any major changes this year, but there should be a visible effect end of 2024 and 2025.

Julian Read was appointed as the new CEO of Doro 13th of March this year, effective 15th of June 2024. With Julian Read stepping in as CEO of Doro, it's typical for new leadership to shake things up with fresh strategies and focus areas. It's a wait-and-see game to observe what changes Julian might bring to the table in the coming months.

Our growth assumptions have been adjusted downward mainly due to the weak sales in this quarter. We now estimate full-year 2024 sales to come in at SEK957m, down from SEK1017m, an adjustment of 6%. We increased our gross margin from 38% to 40% after management was pretty confident it could be a normalized level. During the quarter, Doro took steps to stop selling non-Doro products in Germany due to the new structure. This had a negative effect on margin in the quarter, but over time, a better product mix with products with higher profitability will push up margins. We estimate this effect will take place gradually over the coming years, and we think the EBIT margin will be around 8 to 10% in a couple of years. However, for 2024 Ebit margin is adjusted lower due to higher marketing spend.

We value Doro using a DCF valuation approach backed by a multiples-based valuation. Our WACC is 13%, which is no change from our last update.

Our valuation range is unchanged: SEK15 (15) to SEK39 (39). However, we change Base Case from SEK 30 to SEK29.

Following the breakup of Doro and Careium, Doro's valuation has remained relatively low. Market scepticism regarding the return of growth after significant cost-cutting initiatives and declining volume in feature phones put pressure on the valuation. However, Doro currently holds a dominant market position in most of its geographies, benefiting from the consistent demand driven by an ageing population.

Market cap of Doro is SEK525m, with net cash at SEK183m Doro's enterprise value is SEK342m. This translates to a back-looking valuation of EV/EBIT 5.1x, and 5.7x 2025E based on our estimate. Doros est P/E 2025E is 7.9.

Finding relevant peers for Doro is somewhat challenging. Doro is a niche player selling hardware, and after the break-up and given its lower sales and margins, the market continues to value Doro at depressed multiples. On EV/Ebit 2024E, Doro trades to peers at a 50% discount (median).

An EV/EBIT of 7.1x 2024E paints the picture of low expectations from the market. Applying the EV/EBIT multiple of 11x, suggests a valuation of SEK605m, or SEK25 per share, within our DCF-valuation range. The Doro share is trading at SEK21.50 and the stock is down -1% YTD. As a reminder, the stock X-day is 2024-04-29 for the SEK2 dividend.