CTT Systems: One step forward, one step back - ABG

OEM challenges delay ramp-up, again
CTT continues to suffer from supply chain challenges at its customers. Q2 sales were in the middle of CTT's guidance (SEK 80m vs. 75-85m, +2% vs. ABGSCe) and grew 7% organically. However, despite the positive trend in production rates (Boeing is at ~7 per month for the B787, Airbus' A350 is at ~6 per month), we understand that a reluctance to build inventory among OEMs will hold back sales for CTT to a greater extent than previously expected. Thus, we believe the Q3 guidance of SEK 70-80m sales (we have 78m, 42% organic growth) mainly reflects short-term supply chain difficulties, as >60% higher planned production rates as well as increased content per aircraft should support a significant OEM acceleration from Q1'26e. The slower ramp-up, together with FX headwinds, will also hold back margins, but CTT should still achieve ~30% EBIT margins in Q3-Q4 and deliver earnings growth in Q3 (although lower earnings y-o-y in Q4).