OXE Marine Q3’20: Comment

Key takeaways:

• With its previous order book of around SEK 57m and a rather large inventory, we had expected more deliveries during the quarter.
• Due to this, the order book increased by 77%, now amounting to around SEK 100m.
• The CEO-words revealed sales expectations of Q4’20 being in line with Q3’20
• Based on our initial thoughts and the company’s comment, we are looking at a sales estimate cut in the area of 90% for Q4, resulting in an FY20 sales decline of 55% y/y.
• The estimated production start is set for January 2021 in the US with ONM, and serial production of OXE300 in Q1’21 with PanLink in Poland.

Customer newsflow:

• During Q3’20 Chinese Parsun has purchased an initial batch
• First commercial order from the US Coast Guard of 50 OXE300 via Diesel Outboards LLC has been received, with expected delivery on Q1’21
• Mack Boring supplied the US Coast Guard with four OXE engines in August 2019
• In September, the Russian Rescue Service purchased the first batch of 10 OXE175 outboards

OXE Marine reported its Q3 results well below our estimates with sales of SEK 3m (Redeye est. 37m) and an EBITDA of -21m (Redeye est. -12m). The absence of deliveries represents the deviation to our estimates, where we had expected OXE with an order book of SEK 57m when entering Q3, to deliver from finished stock, which we believe amounts to at least SEK 30m.

The gross margin was above our expectations at 24% vs. the expected 16%; the deviation is mainly derived from relatively higher degree aftersales. The gross margin has varied widely between quarters, and we believe it will continue to do so until OXE has reached a normalized production rate. OPEX increased more than we expected due to the increased costs of establishing its new production facilities.

We certainly believe the upcoming year will be the most interesting – with the OXE300 now being launched, it’s time to deliver for OXE by scaling up sales to reach profitability. We get back with an update.