GARO - Expect another strong report

Q2 report due on 12 August at 07:30 CET We raise EBIT by ~1% for ’21e-‘23e 34x ‘21e EV/EBIT, 8% below the two-year average Q2’21 expectations We expect a strong Q2 report with sales of SEK 300m, +26% y-o-y (25% organic, 0% FX, 1% M&A) on normal group comps. Industry data suggest strong EV charging demand across Europe, and we expect GARO E-mobility to deliver 57% sales growth y-o-y (53% organic), boosted by strong demand for home and semi-fast chargers in tandem with the green tax deduction of 50% of the labour and material costs for installation of home chargers in Sweden. Electrical Distribution Products (+12%) should grow considerably, Project Business (+3%) decent and Temporary Power (+100%) at high levels as a result of uncommonly easy comps. In total, we forecast group EBIT of SEK 47m, for a strong margin of 15.

6% (13. 7% in Q2’20). Demand continues to be high, but we see margins as the biggest risk in H2.

Generally, GARO has good pricing power and we expect limited margin impact from potential supply chain constraints and higher raw material costs. Estimate changes, we raise ’21e-’23e EBIT by 1% We raise our EBIT estimates by ~1% for ‘21e-‘23e, partly due to increased organic growth assumptions for E-mobility and Electrical distribution products, but primarily on higher margin assumptions for the group based on lower-than-expected price and cost pressure. Strong momentum and position, 34x ’21e EV/EBIT The stock has been flat recently (+2% L3M) and is now trading at 34x ‘21e EV/EBIT, which we expect to come down to 27x in ‘23e.

However, we continue to view GARO as an attractive stock, with potential upside given that: 1) demand within E-mobility is high and 2) GARO continues to gain market share on the international market. In addition, we believe that GARO offers appealing EBIT growth at a 20% CAGR in ’20-‘23e, with the margin expanding from 13. 1% in ’20 to 15.

0% in ‘23e.