Estimated Q4 order book levels not seen since ’15

Revised estimates for ’19e, EBIT cut by 23.7%

Share price trading at a premium to historical levels

Order book affecting Q4e and ’19e estimates
We have revised our estimates for Q4’18e as the net order intake has put pressure on the order book, which we estimate will be at levels not seen since ’15 at the close of Q4. We expect Q4 sales of SEK 100.4m, corresponding to negative y-o-y growth of 15.0%, which in combination with sticky opex costs will hurt the EBIT margin. As such, we expect Q4 EBIT of SEK 16.3m, which corresponds to an EBIT margin of 16.2%. Since we expect the net order intake for Q4 to be lower than previously estimated, at SEK 70m, we’ve also revised our ’19e estimates. We have cut ’19e sales by 9.3% and EBIT by 23.7%, resulting in estimated sales of SEK 437.7m and EBIT of SEK 83.4m for ’19e.

Inventory levels in preparation for future orders
Throughout ’18 INVISIO has chosen to increase its inventory of existing product lines, from SEK 43.4m at the close of Q1, to SEK 90.6m at the close of Q3, representing an increase of 108.8%. Management has indicated that the inventory build-up is a deliberate decision, in preparation for new orders that we estimate should be made public during H1’19, given the fact that it would be unwise to increase inventory levels at this point without a good reason.

Revised estimates inflate valuation
INVISIO’s valuation has expanded due to our revised estimates, and at the current share price the share is trading at EV/EBIT of 29.6x and 19.0x for ‘19e and ‘20e, respectively. Compared to the historical average NTM EV/EBIT of 24.9x, this represents a premium of 18.9% for ‘19e.

info@introduce.se (Introduce.se)

ABG Sundal Collier - Introduce.se