• Q3: EBITDA NOK 4m – soft but broadly in line with our NOK 5m
• 2025 ambitions kept, company needs larger project wins in Q4
• '23 EPS down 3%. ~24e adj. P/E ~7x

Q3: lower sales but higher GM

StrongPoint's Q3 was soft, with sales down 15% y-o-y (no M&A help this quarter). Total revenues came in at NOK 293m (-6% vs. ABGSCe). Revenues from Norway were up 8% while Sweden was down 40% y-o-y. COGS was lower than expected, giving a gross margin of 44% vs. our estimate of 39% due to better product mix in Sweden, i.e fewer ESL deliveries. StrongPoint has seen higher personnel expenses in Sweden and the Baltics, where most employees are located. This led to opex rising 25% y-o-y., i.e. clean Q3 EBITDA was NOK 4m (ABGSCe NOK 5m), down from NOK 21m in Q3'22. On a positive note, sales from Baltics were up 16% y-o-y, indicating that the region could become a key market for the company in the future. We have taken a more cautious view, and reduced our '23e EBIT by 2% while keeping our '24e estimates largely unchanged.

Market remains challenging

StrongPoint says grocery retailers are postponing investments, particularly in Norway, Sweden and the UK (within e-commerce). However, the company argues that these effects are expected to be short-term in nature. StrongPoint reiterates its financial ambitions (NOK 2.5bn in 2025) given major projects in the pipeline that it believes will materialise in Q4. This is needed to secure an earnings comeback in '25, in our view.

StrongPoint trading at '24e adj P/E of ~7x

2023 has been challenging, with many delays, and although the Maxima deal provides some comfort, the company needs to land new deals in Q4 to deliver on our '24e estimates. If not, there is major risk that the '24e estimates will have to come down. The share is trading at an adj. '23e P/E of ~19.7x (and 6.3x for '24e). Based on its 2025 targets (NOK 350m in EBITDA at the mid-point), EPS could rise to NOK 5.3 over the next years if the targets are reached, i.e. P/E would drop to ~3.6