I-tech: Sales recovery expected in Q3 - ABG

* Report out on 17 October * Q3e sales of SEK 50m, +23% y-o-y, EBIT SEK 16m (9m) * Q3 rebound expected after Q2 dip


Q3 expectations

We estimate Q3 sales of SEK 50m, +23% y-o-y (+35% organic, -12% FX). We expect Q3 to demonstrate that Q2 was a temporary dip due to natural seasonal variations as a result of the company's business model where the timing of customer orders can shift sales between quarters. With its three active suppliers and gross-margin-enhancing initiatives, we expect the gross margin to continue to improve y-o-y (we estimate 58% vs. 52% in Q3'24). On EBIT we forecast SEK 16m (9m) for a margin of 32% (23%). Our numbers in turn imply lease-adj. FCF of SEK 12m (10m).


Estimate changes and outlook

Ahead of the Q3 report, we have lowered '25e-'27e sales by 2-3% and EBIT by 3.5%, 4.6% and 3.9%, respectively. We expect I-Tech to deliver organic growth of +18% in FY’25e (vs. 47% in '24), but we anticipate it will face meaningful FX headwinds during the year, which should dilute overall growth (we estimate +8.5% growth y-o-y). This stands in contrast to FY’22-’24, when the company benefitted from FX tailwinds.


Outlook unchanged

The overall outlook for the company remains largely unchanged, in our view, and we forecast continued sales growth and profitability improvements over time. The Standing Committee on Biocidal Products (SCBP) held a meeting at the end of September to discuss the continued renewal of Selektope. We expect the Member States of the SCBP to vote on the European Commission's final proposal by the end of the year. However, it is well known that these types of regulatory processes are often delayed and take longer than originally planned. The company is trading at 18x-9x EV/EBIT on '25e-'27e, and 23x-14x P/E, i.e. ~50-30% below the peer median.

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