I-Tech Q4’19: Solid quarter, growth expected to continue

I-Tech reported net sales of SEK 14.6m, slightly above our estimate of 13m, and corresponding to a 34% growth y/y. Sales are mainly derived from its largest customer, Chugoku Marine Paints (CMP), while verification volumes to a yet undisclosed customer continue to develop well.

The company reported a gross margin of 48%, exactly as we expected. Opex came in slightly above our estimates explained by the higher sales activity.

The improvements led to an EBITDA result of SEK 1m as we expected. The quarter's contribution led to a positive EBITDA of SEK 1m for FY19 and we expect the company to be EBITDA-positive from this point. 

Customer highlights

• CMP continues to deliver and represents a majority of the revenue, scaling up nicely as expected. Notably, the Selektope based SEA Premier 3000 PLUS paint was recognized by the Nikkei Business daily awards.
• We had expected I-Tech to disclose a third signed customer (in line with I-Tech’s target) around the end of 2019, which was not the case. However, we believe the customer is currently purchasing verification volumes around a few million SEK, which amounts to the scale-up volumes we previously had forecasted. We believe the customer will be disclosed in 2020.

There was no major share price reaction on the report and it is currently trading at our base case valuation of SEK 80. The report confirmed our solid belief in the company and the management's ability to deliver on set out targets. We do not intend to make any substantial forecast adjustments in the coming update.