I-Tech: Solid Quarter, Slightly Adjusted Growth Curve
Redeye Research Note 2020/10/23
- With Q3-numbers overall in line, we make no significant near-term estimate changes. Anyhow, at this point, there are several factors affecting our forecasted growth curve: i) the postponed delivery to CMP ii) the negative COVID-19 effects on the end customers and its will to invest, iii) increased caution among paint manufacturers in general, in an already conservative market.
- Based on our first thoughts, we will decrease our sales estimates by 20% for 2021 and another 30% for 2022. Still, that indicates a 2021 growth rate well above 30% (CAGR) for the next three years.
- With the adjustments mention above, we adjust our fair value range to SEK 75 (80).
- There was no additional news from the fourth customer in the report. We await an announcement but expect additional news in the coming three months.
I-Tech reported net sales of SEK 12m vs. Redeye est. of 13.5m, corresponding to a 2% decline in growth y/y. Sales are mainly derived from its largest customer, Chugoku Marine Paints (CMP), while we interpret smaller volumes of sales to Jotun and Hempel at this point. In the Q3-report, I-Tech does not mention the ramp-up of the fourth customer, which we interpret as it is taking a little bit longer than expected. We still expect a new customer announcement in the coming three months.
The company managed to transfer its increased logistics cost onto its customers, which we interpret as a sign of strength. This led to a gross margin of 51%, above our expectations of 47%. Opex was also in line with our expectations, leading to an EBITDA of around SEK 1m.