• Q1e sales -10% y-o-y as programme shutdown headwind remains
• FX hedge revaluations to drive strong 43% (23%) adj. EBIT margin
• But strong SEK rally also drives 9-11% '25e-'27e adj. EBIT cuts

Q1 expectations

For Q1, we expect sales to be down 10% y-o-y, as EE production continues to suffer from the previously discussed production programme shutdown in H2, and a weaker automotive market. Comps will start easing in Q3, at which point we expect growth from the ramping FAW and MAN programmes to overtake this headwind. Due to the strong rally in the SEK at the end of the quarter, we expect hedge revaluations to impact the adj. EBIT margin positively by 10pp, leading us to forecast a strong margin of 43% (23%).

Estimate changes

While the significant SEK rally affects Q1e positively, on the flip side it also causes us to cut '25e-'27e sales by 7-8%, and adj. EBIT by 9-11%, as sales are predominantly in USD while opex is predominantly in SEK.

Company valuation

We recently hosted SinterCast's CEO, Steve Dawson, for a fireside chat. He highlighted SinterCast's underlying strong business momentum, pointing to solid '24 installations and a robust pipeline for '25-'26, alongside good visibility of at least two years into new long-lead production programmes. He emphasised likely upside from long-term pricing agreements up for review in '25-'26, that personnel costs are expected to moderate with retirements, which will drive margin expansion, and that the company is not directly impacted by US tariffs, as the US has no domestic foundries in their market segments. Furthermore, he stressed that in the long term tightening emissions legislation and the growing potential for net-zero renewable fuels create significant opportunities, driving demand for SinterCast's fuel-saving CGI technology. The company is currently trading at 18-13x '25e-'27e P/E, compared to its historical medians of 23-15x. We adjust our fair value range to SEK 100-130 (105-145) primarily driven by our estimate cuts.