Energy end-market likely to remain strong - Q3 review

The strong H1 order intake drove sales in Q3, with organic growth at 21% Y/Y. With gross margins well above 50% for both business entities, operational gearing is strong, and Ependion posted all-time high EBITA of SEK95m in the quarter, with the margin expanding 210bps Y/Y. The backlog remains strong, and we expect the sales trend to continue in the coming quarters. We raise our fair value range to SEK170–210 (160–200).

Energy was strong, while rail demand remained steady. Order intake grew 11% organically Y/Y, supported by both business entities. Westermo showed good growth in energy, while the rail segment was seasonally weak. However, demand in rail remained healthy. Beijer Electronics saw good demand from the marine and manufacturing segments. The strong order intake in recent quarters is gradually being converted into sales, and sales grew 21% organically Y/Y. The book-to-bill was 0.85x in Q3, but annualised it was at 1.05x, and the order book should continue to support sales in the coming quarters.

All-time high EBITA. EBITA reached SEK95m as the margin increased by 210bps to 14.3%. Westermo’s margin expanded by 360bps to 18.7%, while Beijer Electronics’ margin rose 80bps to 13.3%. We are especially encouraged by Westermo’s margin, which we believe exemplifies the business entity’s good operational leverage.

X3 progress continued. Although it did not provide details, Ependion said that X3 (its new product family of operating panels or HMIs) continued to increase as a share of Beijer Electronics’ sales. Orders from customers supplying data centres reached SEK80m YTD, and thus represent one of the most important growth drivers for the business.

Mid-single-digit EPS revisions. Following the higher-than-expected EBITA, we raise our 2026–28e EPS by 5–6%, and in turn our fair value range to SEK170–210.