Written by 12:00 Analys

Mushrooming opportunities with NLAW redraws the case in KebNi

KebNi’s report for Q1 2022 showed revenues largely in line with our estimate (6.2 vs 6.9 MSEK), driven by the postponed deliveries to IAI, with final shipments in April. We continue to expect an acceleration in international activity in Satmission to drive a steep increase in sales in 2022, while we expect the mushrooming opportunities associated with existing and next generation NLAW to drive significant growth from H2 2023 and beyond, implying that we can expect first orders for series production in the coming six months. Until we get a clearer picture of the ramp-up, after the first volume order and KebNi’s revised financial targets, we expect the main impact from NLAW volume production to occur beyond our forecast horizon in 2024, meaning that we keep our topline forecast in 2022-2024 unchanged but now see support for a post-money fair value of SEK 1.2-1.8 (1.1-1.3) per share in 12-24 months.

Johan Widmark | 2022-05-03 12:00

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High volume potential drawing closer

Seeing the crucial role NLAW has played in stopping Russian tanks in Ukraine, there is not only need to restore stockpiles of the +10,000 NLAWs already sent to Ukraine. As evidenced by Swedish Armed Forces’ Materiel Administration’s agreements with the Baltic states, there is also an increasing interest from countries neighbouring Russia to buy the weapon system, in which KebNi’s IMU is planned to be included in the next generation, and potentially retrofitted into the current generation. In April, KebNi announced a strategic order to complete the development at an accelerated pace and initiate preparation for series volume production, indicating that the delivery phase could be initiated after series volume production preparations have been finalized in H2 2023. With global component shortage and pressured supply chains, orders would likely have to be placed 12 months in advance of expected deliveries, which means that we could see the first orders for volumes production in the coming six months.

A simple calculation exercise shows that if the UK were to replenish its stocks after the 10,000 NLAWs sent to Ukraine and we assume a price per IMU at the lower end of the range for the type used in NLAW, it would mean a business potential of 200 MSEK for KebNi, to the UK alone.

New targets more aligned with long term goals in H2 2022

KebNi is now in the process of bolstering its coffers with a combination of a fully secured rights issue of units initially of 43.5 MSEK and a directed issue of 10 MSEK. Considering that the subscription price of SEK 0.45 per unit/share equals a steep discount to current share price we expect a full subscription which will give the strength to capitalize on the opportunities at hand.

Furthermore, KebNi’s board has announced the intention to prioritize activities related to NLAW ahead of its existing financial targets and will therefore set new financial targets more aligned with the company’s long-term goals. These will be communicated in H2 2022 but implies that we’re likely to see heavier investments in production in the near term in order to capture higher volumes down the road. Until we get a better picture of the magnitude of the series volume orders, it is hard to estimate the pace of a future volume ramp-up. But we expect the main impact to occur beyond our forecast horizon in 2024. All in all, we maintain our top line estimate for 2022-2024 but calculate for a build-up in capacity in the near term, and higher potential in 2025 and beyond, which support a post-money fair value of SEK 1.2-1.8 (1.1-1.3) per share in 12-24 months.

Read Emergers’ report on kebNi here 

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