* We expect growth to return in a seasonally soft quarter
* Estimates unchanged but costs elevated near term
* EV/adj. EBIT of 10/9x '26e/'27e, ~60% below peers
Volume recovery holds
Generic reports its Q2 on 20 August. We think the recovery in Messaging (SMS and related services, 73% of the group's sales) will continue through the quarter, and we estimate sales of SEK 49m, up 10% y-o-y. Q2 is normally the quietest quarter of the year, as Sweden has many public holidays and fewer messages are sent when offices are closed. Some customer groups (logistics in particular) are likely still cautious about spending. At the same time, we think Generic continues to win customers in areas that depend less on the economic cycle, such as e-health, which should gradually tilt sales towards steadier revenue. For Q2 we estimate a gross margin of 44% and adj. EBIT of SEK 9m, for a margin of 19%.
Minor changes to estimates
We leave our estimates broadly unchanged ahead of the report, expecting 8% sales growth for the full year '26e (4% y-o-y in '25e) and an adj. EBIT of SEK 41m, for a margin of 21%. Recruitment and increased use of external resources should keep costs somewhat elevated in the near term, and we see limited room for margin expansion before the mix shift gains scale.
Trading at an EV/adj. EBIT of 10/9x for '26e/'27e
The stock trades at 10x EV/adj. EBIT on '26e and 9x on '27e, ~60% below CPaaS peers, despite higher growth and EBIT margins of 21% (peers averaging ~10%). With over 30% of Swedish municipalities already penetrated and the offering broadening into regions, authorities and private companies, we expect the shift to lift both recurring revenue and gross margins.