Equity Research Enrad, Q4 2024: Full steam ahead with capital injection in March

Enrad AB’s net sales during Q4 2024 amounted to SEK 14.8 million, which was 6% above our estimates of SEK 14.0 million. Due to a lower gross margin and higher other costs, operating profit was around SEK 4 million lower than we had expected. 

Lower gross margin and higher costs weigh on Q4 results

Enrad AB (“Enrad” or the “Company”) reported net sales of approximately SEK 14.8 million in Q4 2014, which exceeded our estimate of SEK 14.0 million by approximately 6%. Management expects continued strong growth in Q1 2025.

The gross profit of SEK 5.5 million in Q4 2024 was 25% lower than our estimate of SEK 7.3 million. The low gross margin of 37% compared to our estimated 52% is explained by strategic low-margin sales and the write-down of inventory value. EBIT for the fourth quarter was minus SEK 0.6 million, compared with our estimate of SEK 3.3 million. The profit deviation from our estimate of SEK 3.9 million can be broken down to SEK 1.8 million at gross profit and SEK 2.1 million in other external costs, personnel expenses and depreciation. Enrad is expanding production and has hired more staff during the period. Further growth in both sales and headcount is expected in FY 2025.

On 31 December 2024, the Company’s cash amounted to SEK 4.7 million. At the end of Q4 2024, Enrad had cash tied up in receivables and inventories of SEK 26 million. As of 31 December 2024, this inventory was pledged to one of the main owners’ companies for SEK 11 million. In March 2025, Enrad will carry out a fully guaranteed rights issue, which will raise almost SEK 26 million for the Company.

Norway has been Enrad’s strongest market for FY 2024 and is expected to remain so in Q1 2025. Enrad has positioned itself as a niche player in natural refrigerants for refrigeration machines. The company also has a strong local sales organisation in Norway and maintains competitive prices, driving sales in otherwise weak Nordic markets.

Estimate changes

We lower our net sales estimates for Enrad by 4% in 2025 and 2026 and by 1% in 2027. We also slightly increase our long-term revenue growth assumptions from 2029 to 2037. We assume a gross margin of 52% in 2025-2028, which declines from 50% in 2029 to 45% in 2034-2037.

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