* Q1e: 2.8m EEs, -15% sales growth, 18% (37%) EBIT margin * FX headwinds to abate from Q2, market outlook improving *Growth outlook confirmed by incoming CEO in fireside chat
Q1 expectations
While the market outlook is improving for SinterCast, Q1 will likely still be a quarter of subdued earnings. We forecast engine equivalent production of 2.8m (3.1m) and limited equipment sales, due to seasonality, for total sales of SEK 23m, down 15% y-o-y, of which 12% FX. SinterCast's high operating leverage combined with likely negative FX revaluations therefore lead us to expect an adj. EBIT margin of 17.9% (37.4%).
Estimate changes
Q1 currently looks to be the last quarter with such a strong FX headwind, and improved FX rates since our Q4 comment are the primary driver of our estimate upgrades in this note.
Outlook and valuation
We recently hosted SinterCast's incoming CEO, Vítor Anjos, for a fireside chat. Anjos, who is set to succeed Steve Dawson in May, outlined a strategy of continuity but with a new emphasis on inorganic growth, aiming to pursue M&A close to SinterCast's core expertise. He reiterated the updated production milestones of 6m EEs (peak monthly rate) by '29 and 8m by '31, noting that annual volumes typically land 0.2-0.4m below the peak achieved in a given year. Underpinning these targets are two new engine platforms launching over the next two years and a third programme in development for '31 — in some cases representing first-generation CGI engines for the respective OEM. He highlighted that CGI penetration in commercial vehicles is set to rise from 40% today to 80% by 2030, growing roughly five times faster than electrification in the segment. On capital allocation, Anjos signalled a balanced approach between reinvesting for growth and maintaining the dividend, emphasising SinterCast's scalability given its 90% recurring revenue base and lean cost structure. We maintain our view that SinterCast looks set for substantial growth as the commercial vehicle market recovers.