With another NLAW order, from Finland of SEK 400m, Saab’s delivery timeline support a revenue scenario for KebNi that exceeds its own revenue targets for 2024. Simultaneously, we find that capacity build-up has been costlier and near term SatCom momentum has been slower than we expected, weighing heavy on EBIT in Q4’22. Interestingly, Saab indicates an extremely bullish long term outlook for NLAW while the past year’s revaluation of Saab has yet to translate to the KebNi share. Now financed throughout 2023, we find support for a hike of our fair value to SEK 1.9-2.9 (1.7-2.8) per share in 12-24m.
Johan Widmark | 2023-02-27 08:00
Increased costs and slower than expected SatCom in Q4’22
While Q4 did not deliver the pick-up in revenues that we had expected, primarily in the SatCom-segment, the activity and forthcoming ramp-up in Inertial Sensing continues to gain traction. Revenues amounted to SEK 5.4m in Q4’22 resulting in full year revenues of SEK 26m, compared to our forecast of SEK 38m. Costs increased towards the end of the year, mainly due to the establishment of the production lines in Karlskoga ahead of the large-scale Inertial Sensing production. EBIT was further hampered by write-downs of SEK 15m and another SEK 2.5m which was previously balanced in ongoing projects.
Additional Saab order and indications of further upside
As for NLAW, the backdrop for KebNi’s IMU continues to improve, with Finland placing a SEK 400m order to Saab the other week, in addition to the SEK 2.9bn from the UK and SEK 900m from Sweden already in the order book. Interestingly, actual deliveries of the NLAWs to Finland in 2024, in addition to the order from Sweden and the UK, support a scenario where KebNi could exceed its SEK 150-200m revenue target range in 2024. But we see it as more likely with delays compared to the timeline communicated by Saab, but have hiked our forecast for 2024 to SEK 180m.
Also interesting to note is the recent Saab Q4 report conference call where CEO Micael Johansson stated that the ramp-up in NLAW production capacity is huge and that Saab will double production capacity 3x to 2025.
On the anniversary of the invasion of Ukraine, that triggered this renewed demand in NLAW, it is interesting to note that Saab (a diversified military equipment company) is up some +170% since before the war, while KebNi that already has received Saab-orders 2x its annual revenues before the invasion, is only up 75% since.
Maintain forecast of 7x revenue growth to 2025
While IMUs to Saab is a significant piece of KebNi’s new strategic roadmap, there are also other pieces that will leverage the company’s advanced technological platform within stabilisation, positioning and satellite communication to reach the targeted revenue of 150 – 200 MSEK already in 2024 and 20-25% annual growth in the following years, positive cashflow and an EBITDA-margin of 5-10% in 2024.
We now view follow-on orders from Saab and new Satcom orders as primary catalysts in the medium term, and find support for a fair value of SEK 1.9-2.9 (1.7-2.8) per share in 12-24m.
DISCLAIMER
This commissioned research report is for informational purposes only and is to be considered marketing communication. This research does not constitute investment advice and is not a solicitation to buy shares. Information provided here or on Emergers’ website emergers.se is not intended to be financial advice. This research shall not be construed as a recommendation or solicitation to invest in the companies described. Emergers cannot be held liable for either direct or indirect damages caused by decisions made on the basis of information in this analysis. Investors are encouraged to seek additional information as well as consult a financial advisor prior to any investment decision.
This material is not intended to be financial advice. This material has been commissioned by the Company in question and prepared and issued by Emergers, in consideration of a fee payable by the Company. Emergers charges a standard fee for the production and broad dissemination of a detailed note following by regular update notes. Fees are paid upfront in cash without recourse. Emergers may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.
Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained herein represent those of the research analyst at Emergers at the time of publication. The company has been given the opportunity to influence factual statements before publication, but forecasts, conclusions and valuation reasoning are Emergers’ own. Forward-looking information or statements contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.
Exclusion of Liability: To the fullest extent allowed by law, Emergers shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained in this material.
No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Emergers’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in this material may not be eligible for sale in all jurisdictions or to certain categories of investors. Investors are encouraged to seek additional information as well as consult a financial advisor prior to any investment decision.
Investment in securities mentioned: Emergers has a restrictive policy relating to personal dealing and conflicts of interest. Emergers does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Emergers may have a position in any or related securities mentioned in this report, subject to Emergers’ policies on personal dealing and conflicts of interest.
Copyright: Copyright 2023 Incirrata AB (Emergers)
United Kingdom
This document is prepared and provided by Emergers for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the ”FPO”) (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.
This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.
United States
Emergers relies upon the ”publishers’ exclusion” from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Emergers does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.
