* Sales up 2% y-o-y as a slow summer holds back volumes
* Gross margin of 46%, the strongest in several quarters
* EV/adj. EBIT of 8x/7x ‘27e/'28e, ~50% below peers
Slower growth on seasonal effect
Generic reported a soft top line but a beat on profitability in Q3. Sales grew 2% y-o-y, held back by a slow summer period; the weakness sat in operator solutions (~19% of sales), down 9% y-o-y, where customer activity was low although subscriptions remained in place. However, messaging still grew 4% y-o-y and digital products grew 19% y-o-y, and no customers were lost, which is why we read the quarter as seasonal rather than structural. The same split showed in the customer base, where healthcare and e-health held up well and logistics remained the soft spot. Profitability moved the other way, as the gross margin of 46% was the strongest in several quarters, driven by a higher share of sales from the fully SaaS DOCS product. Adj. EBIT came in at SEK 11m, at a margin of 24%.
12% growth in '27e-'28e on a higher cost base
We lower our sales estimates slightly on the back of this report. Looking ahead, we think Generic will need to carry higher costs in order to grow, as we have said before, and we estimate OPEX growth of 12% in ‘27e-‘28e (vs 10% last 5 years) against sales growth of 12%.
Room to grow from here
The company is valued at 8x/7x on EV/adj. EBIT on '27e/'28e, ~50% below peers. DOCS is now in roughly a third of Swedish municipalities, which means there are plenty of opportunities ahead, and we think the add-on licences for existing customers are as interesting as the new logos, since they come with no real cost attached for Generic. We also see RCS as the one new revenue driver worth following, with the first operator launching shortly. With AI affecting cybersecurity in Sweden, we think Generic has an advantage in owning its own data centre and storing everything within its own servers, which fits well with the new SMS rules that have been in place since August.