All eyes on improvements - Q3 review

We do not believe 2026 being somewhat weaker than anticipated changes our view of the equity story, as we have already considered 2026 a lost year. The key focus is on the measures management has taken to reverse the trend and return W5 to profitability. The 7%-point Q/Q improvement in the gross margin, combined with the announced SEK30m cost-saving programme versus the current cost base, strengthens our conviction in a return to profitability in 2027e. We maintain our fair value range of SEK37–47 per share.

Strengthening gross margin is key. The gross-margin improvement in Q3 was driven by several factors, including a more favourable product mix compared with Q2. To create a more stable gross margin, W5 has renegotiated contracts with customers and suppliers. It will likely take time for the full effect of this work to become visible, and we currently estimate a gross margin of c51% in 2027.

Cost savings lift our estimates. We view the announced cost-saving programme positively. W5 has initiated measures to reduce costs by SEK30m from the current cost base, primarily through lower use of consultants. Despite lower sales estimates for 2027, the reduced opex leads us to raise our EBIT estimates.

2026 in line with guidance, improvement expected in 2027. Our 2026 estimates reflect the updated guidance, while the outlook for 2027e appears more encouraging. Opex in 2026 includes cSEK20m of one-off costs. Combined with additional cost savings and continued sales growth, this should support improved profitability, provided the gross margin remains above 50%. Significant internal execution will be required, but successful delivery would result in a clear improvement in 2027e.

Maintained fair value range of SEK37–47. Our fair value is based on a 2027e EV/EBIT range of 15–19x, slightly below our previous multiples range due to lower peer-group valuation multiples.