Source: Inderes & Modular Finance consensus (20.04.26, 10 estimates)

Saab's Q1 report showed strong operational execution, as the company clearly exceeded our expectations for both revenue and EBIT. Although a lack of large projects left the quarter's order intake significantly below our estimate, the unwinding of the order backlog supported stronger-than-expected organic growth and profitability. Despite the volatility associated with order timing, the company's delivery capability is on a strong footing, which we believe creates upward pressure, particularly on our short-term profitability forecasts.

Delay in large orders left order intake soft

The quarter's order intake decreased slightly from the comparison period, settling at ~18 BSEK, which was significantly below our 25 BSEK estimate. The company reported strong growth in medium-sized orders, but the low number of large orders in the quarter explains the deviation from our expectations. As we have previously stated, the timing of orders in the defense industry is inherently uncertain and causes volatility between quarters.

Order backlog unwinding boosted growth and profitability

Revenue growth accelerated more strongly than we expected as the company successfully converted its strong order backlog, with revenue rising to ~19 BSEK, mildly exceeding our ~18.5 BSEK estimate. Organic growth of 23.6% was supported by double-digit growth across all business areas, and the company highlighted particularly strong performance in the Surveillance unit.

The strength in revenue directly translated to the bottom line, with EBIT of ~1.9 BSEK clearly exceeding our ~1.6 BSEK expectation. We had anticipated the EBIT margin to decrease to 8.4% due to capacity investments and ramp-up costs, but the margin reached 10.0%, even surpassing the comparison period's level (9.2%). We believe that higher delivery volumes supported operating leverage and mitigated cost pressures from the ongoing capacity ramp-up. EPS of 2.65 SEK (Q1'25: 2.35 SEK) also clearly exceeded our 2.28 SEK estimate. In addition, operational cash flow significantly strengthened to 1,017 MSEK from a negative level in the comparison period (-14 MSEK), indicating improved capital management during the current growth phase.

Management emphasizes delivery capability, upward pressure on forecasts

Saab typically does not provide precise numerical guidance for the current year in connection with interim reports. CEO Johansson stated that the company continues to "develop future capabilities and invest in capacity while strengthening our ability to deliver products to customers in the short term." This supports our view that supply chain throughput is currently the most significant constraint on growth. We expect the report to create upward pressure, at least slightly so, particularly on our profitability forecasts for the current year due to strong operating leverage, although the soft order intake reminds us of the risks associated with timing.