Troax Group Downgraded to 'Hold' by Berenberg on Automotive Headwinds

Berenberg has downgraded its rating on perimeter protection manufacturer Troax Group AB to “Hold” from a previous “Buy” recommendation. The brokerage also significantly cut its price target on the stock to 120 Swedish crowns from 165 crowns, signaling a more cautious outlook driven by headwinds in the automotive market and a prolonged timeline for margin recovery.

Margin Recovery Expected to Be a 'Years' Long Process

Analysts at Berenberg stated that consensus expectations for Troax's profit margin recovery are "overly optimistic." The firm highlighted that while the market anticipates the adjusted EBITA margin to climb from 13% (on a last-12-months basis) to 18% in 2027, its own forecast for 2027 EBITA is 15% below that consensus.

"We do not think anything is broken at Troax, but expect the margin recovery to take years rather than quarters, which is not reflected in either consensus estimates or the valuation," Berenberg said in its note. The brokerage's new price target is derived from a discounted cash flow model.

Disappointing Q1 Results Underscore Challenges

Troax's first-quarter 2026 results, reported April 21, were a key factor in the reassessment. While acquisitions bolstered top-line figures, Berenberg noted that the underlying performance "disappointed across the board." Key figures from the quarter included:

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• Order intake declined by 5%.
• Revenue fell by 13%.
• The EBITA margin dropped to 10.1%.

The decline in orders was primarily driven by a sharp drop of at least 50% in the automotive customer segment. In contrast, orders from the warehouse sector provided a bright spot, increasing by more than 5% for the second consecutive quarter. Berenberg also anticipates continued pressure in the second quarter from ongoing operational issues, including a U.S. factory transfer and production ramp-ups in Sweden.

Balance Sheet Leverage Rises After Acquisitions

Troax's recent acquisitions of Vichnet, Stommpy, and Dancop were described as a "positive surprise," contributing €14 million in revenue during the quarter. However, the deals have increased the company's financial leverage.

Troax’s net debt-to-pro forma EBITDA ratio rose to 2.7 times in the first quarter, up from below 1 time a year earlier. Berenberg expects this ratio to exceed 3 times later in 2026, which will likely leave "limited capacity for further acquisitions in the near term."