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FPC scarred by the bullwhip

Inventory depletions in the downstream supply chain is currently hitting FPC hard and we expect H1 revenues to decline 47 percent YoY. However, we persist in arguing that the current situation will resolve in H2 and we expect H2’17 revenues to increase 19 percent YoY followed by 44 percent growth in FY’18. We argue that FPC stands well positioned to maintain its leading position in biometrics for mobile devices and will leverage its capabilities to drive adoption of biometrics in new segments and expand its biometric offering – this will lead to solid growth in the long term. The share trades around our bear case of SEK 36, and we see over 200 percent upside to our revised fair value of SEK 120 in our base case – though the company has to regain the market’s trust for the share to appreciate.

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