GARO - Record-breaking quarter

Q4’20 EBIT 50m, 2% vs. ABGSCe and 5% vs. Cons E-mobility outperformed with 39% growth y-o-y Trading at c. 38x EV/EBIT ‘22e Q4’20 results GARO delivered Q4 group sales of SEK 306m, (2% above our expectations at SEK 300m and 1% vs.

FactSet Consensus). Group sales grew by 16% y-o-y (10% organic, 1% M&A, 0% FX), and 0% vs. ABGSCe.

As we expected, E-mobility outperformed the other division and delivered 39% y-o-y growth. All in all, group EBIT arrived in at SEK 50m, (2% vs. ABGSCe at SEK 49m and 5% vs.

FactSet Consensus), for a 16. 2% margin (12. 9% in Q4’19) and in line with our expectations.

Earnings were primarily driven by 1) economies of scales from higher volumes, 2) favorable product mix (primarily the E-mobility division), and 3) a more advantageous currency situation. Margin improved in the quarter, primarily due to a favorable price and product mix. Net profit came in at 34m, vs.

our expectations at SEK 37m. Finally, operating cash flow amounted to SEK 83m (67m), attributable to higher earnings combined with lower tied-up working capital than the year-earlier period. Outlook and estimate changes Management highlight high demand across the entire product range within E-mobility and expect this to continue, with further expansion across all markets.

Based on the Q4 numbers alone, we expect to make earnings upgrades for ‘21e-’23e, likely 1-2%. Final thoughts and conf call details The share has been a massive outperformer, up c. 90% in LTM and is currently trading (pre-Q4 report) at 38x EV/EBITA ‘22e.

There is a conference call hosted by the President & CEO Patrik Andersson and CFO Helena Claesson, at 09. 30 CET today. Dial in: SE: 0200-123717, All other locations: +44 20 3936 2999, Participant Access Code: 345836.

A live stream can be followed at: http://corporate. garo. se/en/media/press-archive.