Q3 results relatively in line with our forecasts

Ovzon-3 project appears to be well on track

6x 2022e EV/EBIT, driven by Ovzon-3 sales

EBIT hurt by continued low utilisation of its leased capacity
Ovzon saw Q3 sales of SEK 32m (ABGSCe SEK 38m), corresponding to a sales decline of -43% y-o-y. This was relatively in line with Q2’20 and reflects the delivery of an order announced in March that contained a lower order value compared with historical levels. This means that Ovzon leased capacity has not been fully utilised, which in turn has hurt its gross margins. Lower sales together with lower gross margins led to EBIT of SEK -17m (vs. SEK 2.1m in Q3’19) against our forecast of SEK -16m. Capex was SEK 135m, meaning that Ovzon has now invested SEK 880m in its Ovzon-3 project (it expects to invest ~SEK 1.5bn in total).

Leased capacity sales should grow in 2021e
As usual, our key focus in Ovzon’s quarterly reports is the development of the Ovzon-3 satellite project. The company reports that the project is progressing according to plan, and reiterates that it expects it to finish by the end of 2021. Ovzon has also recently signed contracts for increased leased capacity with Intelsat and Hellas-sat. Although this is already reflected in our 2021 forecasts, the signings give us increased confidence that Ovzon should be able to improve its leased capacity sales in 2021. Even so, we reduce our 2020 and 2021 sales forecast by 4% and 7% due to lowered utilisation assumptions for the company’s older leased capacity. Our 2022 forecasts are relatively unchanged.

Recent product demonstration shows good results
On 9 Oct., Ovzon announced that it recently completed a demonstration for satellite broadband on helicopters in flight. Interestingly, Ovzon was able to achieve 17Mbps up and downlink speed, despite that the helicopter flew in heavy rain. According to our research, the high speed is significantly higher than any competitive solutions, which in turn is important for the investment cas
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