EUR 437.02 For Business Accounts Only

Veoneer Minor model adjustments

We expect automotive industry headwinds (chip shortages and supply-chain disruption) to remain a drag on the gross incremental margin ahead of the Q2 results (due on 23 July, time tba). Although we have lowered our 2021 gross profit forecast by 5%, our 2021–2023e sales are unchanged. We do not consider these changes to be material and have not changed our BUY recommendation. We reiterate our SEK300 target price. Accelerating revenue growth and improving operational leverage in Q3–Q4e, as higher content per vehicle regions look set to ramp up with a rebound in order intake. We still expect a 20%+ medium-term organic growth phase in the early stages of the L2+ ADAS industry mass rollout, which could potentially spark a shift in perception and multiples expansion. Q2 preview. We expect sales to outperform LVP in Q2, with organic sales growth of 107% YOY, corresponding to sales of USD391m (1% below Infront consensus), EBIT of USD-101m (11% below consensus), and an FCF burn of USD96m, suggesting a cash position of USD549m by end-Q2e. We believe Veoneer can deliver on most of its commitments for Q2, but tight supply chains could continue to pressure its cost base and gross incremental margin. BUY and SEK300 target price unchanged.