• EE headwinds from programme end-of-life and automotive market
• Mix effects and major FX revaluations likely to weigh on margin...
• ...but we forecast significant '25e recovery on strong installation activity

Q4 expectations

For Q4, we expect a production rate of 3.2m EEs, down 14% y-o-y, as the company faces headwinds from the 0.5m programme that reached end-of-life in September alongside a generally weakening automotive market. Despite this, we expect sales of SEK 36m, in line with last year, as the weaker series production revenue is offset by stronger equipment sales of SEK 7.4m (2.1m). The mix shift is negative for margins, however, as is the significant q-o-q strengthening of USD/SEK, which usually leads to negative FX revaluations. Given these factors, we forecast an EBIT margin of 17.8% (43.6%). The likely negative FX revaluations have a -13.7pp effect on the margin vs. last year when they had a positive effect of 11.4pp on the margin for a total -25.1pp y-o-y difference.

Estimate changes

The weaker automotive market leads us to reduce '25e-'26e EEs by 3-4%, but this is offset by the strengthened USD/SEK, meaning sales and EBIT estimates remain largely unchanged.

Company valuation

While our Q4 estimates imply a sharp drop in earnings, we emphasise that a significant portion of the decline is due to volatile FX revaluations that tend to normalise over time. As well, while the company is currently facing headwinds from the programme recently reaching end-of-life and a weaker automotive market, we believe the strong installation activity as well as the other ramping programmes will support a significant recovery in '25e. The company is currently trading at 24-14x '24e-'25e P/E, compared to its historical median of 22-14x. We revise our fair value range to SEK 105-135 (115-135) on a higher market discount rate.