Equity Research Enrad, Q1 2024: Better than expected start to 2024

Enrad AB’s net sales of SEK 7.6 million in the first quarter exceeded our forecast of SEK 2.9 million by a considerable margin. The high sales were due to orders that were not announced in advance. Carlsquare Equity Research raises its sales and earnings forecasts for 2024-2026 by between 20 and 73%.

Good start to 2024 despite weak Swedish market

Enrad AB (“Enrad” or the “Company”) reported net sales of approximately SEK 7.6 million for Q1 2024. The day before the Q1 2024 report, Enrad sent out a press release about orders of SEK 5.3 million to its Norwegian subsidiary. Gross profit after purchases of goods and supplies was around SEK 4.3 million, compared with our estimate of around SEK 1.6 million. Operating profit after depreciation was minus SEK 1.2 million, compared with our estimate of minus SEK 1.9 million.

Enrad sells into a market for cooling and heat pumps that is affected by the interest rate situation for the important customer group of homeowners. Order intake is expected to increase from the second half of 2024, when interest rates are expected to fall. Enrad’s marketing is facilitated by the fact that the European Parliament adopted two new F-Gas regulations on 29 January 2024, in which the company has positioned itself in the segment of chillers using natural refrigerants.

Probably no need for capital in the coming quarters

Enrad’s cash and cash equivalents amounted to SEK 3.0 million on 31 March 2024, compared with SEK 6.4 million on 31 December 2023. The company has pledged its inventories through the main owner’s company. Enrad’s capital tied up in inventories amounts to SEK 20 million, of which SEK 8 million is pledged as of 31 March 2024. Management is evaluating options to secure working capital but believes that it is possible to continue operations during the remainder of 2024 without capital injection.

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