CTT Systems: Getting ready for the OEM ramp-up - ABG
Sales trough reached, return to EBIT growth in Q3e '25e-'27e EBIT down 29-13% on FX and system sales 26-12x EBIT '25e-'27e, ~30-50% ROCE, net cash
ANNONS
Aftermarket normalisation completed already in Q1
As expected, CTT's Q1 saw a steep organic decline (-33% vs. ABGSCe -36%) and a 7% EBIT margin (ABGSCe 17%) due to inventory adjustments in the aftermarket ('AM') channel. However, what we find encouraging is that CTT believed the destocking was completed, which should yield sales of SEK 75-85m in Q2 (we have 78m, +4% organic), vs. ~SEK 54m in Q1. Although we have revised both OEM and VIP sales to reflect supply chain challenges and a lower penetration rate (should be clearly higher from 2026), we argue that the sales trough has been reached, and that CTT's organic growth should accelerate to ~65-40% in Q3-Q4. FX headwinds and a negative mix should still hold back earnings despite CTT returning to >30% margins already in Q2'25e. We therefore assume a ~20% EBIT decline in Q2, ~140% growth in Q3, and a ~10% decline in Q4, before accelerating to 50-40% growth in 2026-2027. Finally, we find it comforting to see that both Boeing and Airbus have seemingly stabilised their supply chains, and are now on track to ramp-up their production rates, which raises confidence in a clear uptick in OEM sales for CTT.
