Q2 sales up 5% vs. ABGSCe
Expecting lower sales in Q3 due to weak order intake
1.9x-1.5x ’21e-’23e EV/sales

Motion Display Scand. (MODI) reported a Q2 where sales rose 10% y-o-y (vs. ABGSCe up 5%). COGS were lower than expected, which led to a record 61% gross margin in the quarter (up 5pp vs. 56% in Q2’20). This corresponded to higher-than-expected EBITDA (SEK 0.4m vs. ABGSCe SEK -0.6m). MODI attributes the profitability improvement in the quarter to streamlining of purchasing, processing, and routines, in addition to a sales mix tilted towards smaller-scale customers which typically generate higher gross margin. We think the better cost control is encouraging for future profitability. On the negative side was the weak new order intake in the quarter. New orders amounted to SEK 1.4m in Q2 vs. SEK 5.8m last year. Correspondingly, the order book at the end of Q2 was SEK 1.9m, vs. SEK 4.9m last year. We had expected a higher order intake. The company points at COVID-19 related issues still having an impact on customers’ ordering processes. Moreover, mgmt. said the US was particularly week in Q2, but that the situation is improving.

On our new estimates, MODI is trading at 1.9x-1.5x ’21-’23e EV/sales. We now forecast negative EBITDA for 2021, but back to positive in 2022. We believe that EBIT will stay negative, mainly due to high D&A costs.

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