Topic: Last Friday, Astor released preliminary Q3 figures, showing a continuation of growth and margin expansion amid rising orders and scale. In detail:

Q3 sales rose by 79% yoy to SEK 79m, driven by a mix of past M&A (eNuW: 52% yoy inorganically) as well as strong underlying growth (eNuW: 27% yoy organically). Especially the consolidation of Scandiflash (Q4’24) should have again driven inorganic sales growth the most. Mind you, Q3 is usually considered a “weak” quarter, given the Swedish summer holidays and thus seasonally less output. Against this backdrop, this development stands even stronger and highlights the superb momentum at Astor, in our view. For 9M, this implies sales growth of 86% yoy, of which we estimate 31% to be organically and 55% inorganically.

A clear highlight of the release was the bottom-line, with Q3 EBITDA arriving at SEK 15m (vs. SEK -3.9m in Q3’24). The EBITDA margin thus stood at 19% (+28pp yoy), which is an outstanding result for a seasonally “weak” quarter. On an LTM basis, EBITDA margin reached 15.7%, which already exceeds the mid-term target of at least 15%. We attribute the strong increase in EBITDA to several drivers: (1) the consolidation of the highly profitable Scandiflash (32% EBITDA margin) has lifted the margin mix significantly, (2) overall rising utilization rates amid growing orders, (3) improving coverage of fixed costs, especially holding expenses and (4) first at-equity contributions from the recently closed Nordic Shield Group acquisition.

Looking ahead, Q4 is seasonally strong and aims for new records. With the expected upcoming consolidation of AMMUNITY (FY’24: SEK 103m sales, 21% EBITDA margin with an estimated SEK 1.1bn order backlog) in Q4, the revenue base should be lifted notably while the consolidation should also be highly margin accretive. In sum, we expect Q4 sales of SEK 154m (+69% yoy, thereof 26% organically and 43% inorganically) and an 18% EBITDA margin.

Newsflow should remain upbeat. Following recent drone infringements at European airports, Europe is currently massively increasing anti drone-defence commitments. Germany is committing € 10bn (for both, drones and drone defence), whereas Sweden announced SEK 3.5bn for drone defence. Here, Astor seems perfectly positioned with its Astor Eclipse to capture parts of the budgets with upcoming order intake announcements.

All in all, the release fully underpins our positive view on the stock, that offers a strong sales and margin expansion profile, excellent tailwinds and an attractive valuation. Consequently, we reiterate our BUY recommendation with an unchanged PT of SEK 56.00, based on DCF.