• Q1 EBITA +16% y-o-y while peers decline, 8.9% (7.9%) margin
• Strong start in weakened market increases our full-year confidence
• Order situation improving, but M&A a more likely growth driver in '24e

Q1: Stands out among peers

Inission reported Q1 sales of SEK 581m, up 3% y-o-y, driven by 4% M&A growth, meaning that organic performance was down slightly but still held steady in a weakened market. Impressively, the company managed an 8.9% EBITA margin, up 1.0pt y-o-y, in an environment where most peers reported declining margins. The company attributes this to good cost control, lower material costs and sell-through, as well as the underlying work on improving profitability. Lease-adjusted FCF was weighed down by the SEK 82m repayment of pandemic-related tax relief, and thus came in at SEK -33m, but adjusted for this financing-type flow reported as a working capital change, FCF was also strong.

Increased confidence in margin progression

The strong margin performance in the quarter coupled with the positive comments from management regarding the order intake improving q-o-q gives us increased confidence in our full-year estimates, and we raise '24e EBITA by 4%, implying a margin of 7.3%, slightly above the company's guidance of 7.0%. While organic growth will likely be limited in '24e due to the weakened market, management sounded more optimistic on the possibility of further M&A growth, stating that there are more targets available in the market and at more attractive valuations than before. The company is involved in several interesting processes, according to management. We think the company has a solid track record of value-accretive M&A, and at 0.9x ND/EBITDA adj. lease adj., there is room in the balance sheet to carry out further acquisitions in '24e.

Trading at 10-8x '24e-'26e P/E

The share is up 10% L3M (vs. peers 0%, Swedish small caps +5%), and is currently trading at 9-7x '24e-'26e EV/EBITA or 10-8x P/E, while the peer medians are 9-8x and 12-9x, resp