Weak EV Charging Demand Will Strain Margins Yet Spark Recovery

Key Takeaways

• Sluggish EV charging demand, customer concentration, and regional imbalances create volatility in growth, margin pressure, and dependence on key markets.
  
• Rising compliance and R&D expenses may limit profit expansion, while sector consolidation could restrict M&A success and long-term earnings improvement.
  
• Heavy reliance on niche segments, market hesitancy, geographic shifts, and macroeconomic pressures heighten risks to both revenue stability and margin improvement.

Catalysts

Develops, markets, and sells battery charging products for vehicles in Sweden, Nordics, DACH, the Americas, rest of Europe, and internationally.

• Although CTEK is positioned to benefit from increasing electrification and regulatory pressure for greener, more connected transport solutions-especially via its expansion into adjacent product categories like Premium Boosters and Power Solutions that aim to triple the addressable market-near-term demand in the EV charging segment remains sluggish, and the canceled General Motors contract highlights how customer concentration and weak sector activity may challenge top-line growth and delay the realization of ambitious revenue targets.
  
• While long-term tailwinds from higher global adoption of battery-powered vehicles and the rising complexity of aftermarket energy storage should support demand for CTEK's core offerings, the overall momentum remains geographically uneven, as proved by reliance on high-margin markets like Australia; this regional imbalance could keep gross margins under pressure and makes earnings growth more volatile than anticipated.
  
• Even with the launch of next-generation products (such as the Chargestorm Connected 3) that boast enhanced cybersecurity and regulatory compliance features, accelerating industry requirements-including stricter standards for data privacy and fast-evolving technical specifications-are poised to drive up compliance costs and R&D outlays, potentially limiting net margin expansion over the medium term.
  
• Despite recurring profitability reported in both the Consumer and Professional divisions and potential operational efficiencies from automation and R&D investment, the current low activity in the EVSE market means that increased volumes, especially in the U.K. and Germany, are required to achieve targeted EBITDA margins, exposing CTEK to downside risk should these new market entries take longer to scale.
  
• Although CTEK's solid financial position enables it to pursue M&A as a pathway for accelerating growth and expanding service capabilities, the broader sector trend toward consolidation-where large-scale players dominate-may restrict CTEK's ability to attract marquee deals or achieve sufficient cost synergies, thereby tempering the longer-term impact on both revenue and earnings stability.

CTEK Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on CTEK compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming CTEK's revenue will grow by 5.5% annually over the next 3 years.
• The bearish analysts assume that profit margins will increase from -4.6% today to 16.7% in 3 years time.
• The bearish analysts expect earnings to reach SEK 181.7 million (and earnings per share of SEK 1.95) by about August 2028, up from SEK -42.4 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 8.1x on those 2028 earnings, up from -23.5x today. This future PE is lower than the current PE for the SE Electrical industry at 22.2x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.65%, as per the Simply Wall St company report.

CTEK Future Earnings Per Share Growth

Risks

• Prolonged weak activity and hesitation in the EVSE (charger for electric vehicles) market, particularly with the loss of the General Motors contract and slow sales in both the UK and Germany to date, may put continued downward pressure on revenues and limit growth in the Professional division in the near
• to mid-term.
  
• Strong dependence on niche, high-margin customer segments such as premium OEMs and high-end consumer brands increases the risk of revenue volatility and price competition as these markets mature or if larger, diversified competitors enter these niches, eroding both revenues and net margins over time.
  
• The company's growth and margin improvement goals rely heavily on the successful launch and adoption of new adjacent product categories (Premium Boosters and Power Solutions) by 2026 and beyond; failure to execute or achieve significant market penetration in these new segments could result in missed top-line and earnings targets.
  
• Geographic shifts in sales mix, exemplified by the reduction in high-margin sales to markets like Australia, have already negatively impacted gross margins in the Consumer division, highlighting the risk that further shifts toward lower-margin geographies could suppress profitability despite topline stability.
  
• The continued macroeconomic uncertainty and cautious inventory behavior from distributors and retailers, exacerbated by broader sector concerns such as rising interest rates and tight credit, threaten sustained demand recovery and can lead to further inventory de-stocking cycles that impact both quarterly revenues and net earnings.

Valuation

• The assumed bearish price target for CTEK is SEK17.0, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of CTEK's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of SEK28.0, and the most bearish reporting a price target of just SEK17.0.
  
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be SEK1.1 billion, earnings will come to SEK181.7 million, and it would be trading on a PE ratio of 8.1x, assuming you use a discount rate of 7.7%.
  
• Given the current share price of SEK14.22, the bearish analyst price target of SEK17.0 is 16.4% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.