Doro - Continuously improving

Solid recovery for Phones drove 79% adj. EBIT beat We raise our ’21 ests. , and expect further recovery in H2 ’20-‘23e adj. EBIT CAGR of 15%, 10x ‘22e EV/EBIT Sales +22% y-o-y and +13% vs.

ABGSCe On the back of reopened societies, Doro reported a good quarter, with +22% sales growth y-o-y (+13% vs. ABGSCe). Both its two business areas performed well in terms of sales, with 9% organic growth for Care (+3% vs.

ABGSCe) while Phones reported 26% growth y-o-y. As expected, the gross margin for Phones remained high, driven by FX and a favourable sales mix. We expect the latter to endure in H2, but estimate this to be offset by increased costs from the distressed supply chain.

The gross margin for Care, however, remained muted, and we believe this will persist in H2e, but that it should increase in 2022e. Even so, the solid sales growth gave an adj. EBIT of SEK 31m (79% above ABGSCe SEK 17m).

As in previous quarters, this was supported by Doro’s restructuring programme. It has now implemented SEK 105m of the planned SEK 130m cost savings. Estimates up on higher Phones sales assumptions We increase ’21e sales by 11% on the Q2 beat, and ’22-’23 by 2%.

This reflects higher growth assumptions for Phones, while we leave our Care sales estimate relatively unchanged. In terms of adj. EBIT, we increase our ‘21e estimate by 15% but cut our ‘22e forecast by 1% due to lower gross margin assumptions for Care.

Reinforced organic growth outlook for Care We continue to see good growth prospects for Care, and the Q2 results have reinforced our view. In Sweden, Doro has recently won several new procurements, and we think that the UK market will show increased activity in H2 as more lockdowns ease. Although Doro has ceased its Phones operations in several markets (e.

g. in the US and parts of Southern Europe), we now forecast 1% sales growth in 2021 driven by pent-up demand. At the current share price, Doro’s share is trading at 10x ‘21e EV/EBIT.

With the NIBD ‘21e of 0. 1x, we e.