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Doro Q1’17 preview: Care sales starts to return

We expect Doro to report sales of SEK 479 million after a sales growth of 15 percent in its Q1’17 report, on Thursday April 27. We expect EBIT to be only SEK 9 million, in line with last year, as the first quarter is seasonally weak and we assume that it will take more than one quarter for Doro Care to recover from the final court decision regarding the Care appeal.

We reiterate our base case of SEK 82 per share, which implies a great margin of safety in relation to our bear case of SEK 50 and the current share price of SEK 56. In our opinion the margin expansion from Doro Care is the key catalyst in closing the price/value gap.

Thus, most of our focus in the report is on Doro Care. We have seen several won tenders during the start of 2017, implying that Doro Care indeed is under recovery. We are also curious to see whether we are right in our view that the strong gross margin trend could continue. Our gross margin prognosis for Q1’17 is 38 percent and our assumptions are that the positive Trygghetssentralen effect (migration to digital alarms) from the previous quarters is sustainable and that the negative smartphone effect is negligible.