* As flagged, Q2 was soft on postponed ODM/WL orders
* We expect a seasonally stronger H2e
* Mgmt. guides for FY'26e EBIT break-even; we are more cautious
Q2 as flagged, but slightly below our forecast
Q2 net revenue was SEK 20m (15.4), -60% q-o-q and 23% below our SEK 26m, as ODM/WL customers again rebalanced inventory and postponed orders into H2. ODM/WL sales fell 82% q-o-q to SEK 6.2m, while ES-branded sales held up better at SEK 13.8m (-13% q-o-q, +23% y-o-y), taking own brand to 69% of the quarter. Despite the sales miss, EBIT of SEK -13m was only SEK 1m below our estimate, as opex fell 7% y-o-y to SEK -19m on implemented cost savings. Gross margin on net revenue fell to 25% (29%), which the report attributes to the ongoing phasing out of older-refrigerant stock.
We model recovery, but not break-even
Management's guidance points to FY'26e EBIT approaching break-even, conditional on planned orders materialising, and says the swing comes mainly from heating season revenue rather than cost cuts. We see this as supportive, and raise '26e sales by 3% and EBIT by SEK 4m to SEK -7m, but we do not model break-even for the year. H1 EBIT of SEK -17.6m implies H2 of +SEK 17.6m, requiring H2 sales of SEK 170-185m on a flat cost base, ~50% above H2'25. We expect ES to return to profitability in H2'26e, but we model sales of SEK 152m for H2'26e and continue to forecast a return to full-year profitability in '27e.
Structural drivers intact
Post-Q2, ES agreed on a technology partnership with Enrad in propane heat pumps for industrial and commercial properties, and proposed a unit issue of ~SEK 17.8m gross. We still expect negative FCF in '26e and note a more pressured cash position at SEK 18.4m, so the incoming proceeds should ease the near-term picture. With improving profitability and a recovering market, we think ES should return to positive FCF in '27e and strengthen its financial position from there. ES is trading at 9x-3x EV/EBIT '27e-'28e.