Smart Eye has announced up to 53 Driver Monitoring System (DMS) design wins from a new major North American car manufacturer customer (OEM). The estimated revenue of the order is SEK800m, based on a seven-year product life cycle, making it the largest deal to date. Thus, this deal trumps the 34 new design wins Smart Eye received last Friday, December 9, which was back then the largest deal in the company’s history. In little under two weeks’ time, Smart Eye has moved up from 102 design wins with 15 different OEMs, to 194 design wins from 18 OEMs, which we find impressive.

Smart Eye comments on the news: “One part of the volume is targeted towards fulfilling upcoming European legislation that makes DMS mandatory, starting in 2024 for new platform cars. In 2026, all European cars including legacy platforms are included. The largest part of the volume goes to the OEM’s new platform for a so-called Software Defined Vehicle, which typically has few but very advanced in-car computers, intended for the markets of North America, Europe and China. The models that include Smart Eye’s technology will start going into production in 2024 and continue well into the 2030’s.” As most of the cars in the deal are either legacy cars for Europe or being transferred to new software platforms, Smart Eye has not calculated additional design win value on the existing platforms.

Martin Krantz, CEO and founder of Smart Eye is quoted saying: “During the year, when I repeatedly communicated that our market position is strong, this is what I meant. This new order, which has been in the making for some time, means three things for us. Firstly, we solidify our position on the important European market, estimated to be 18 million vehicles in 2026. Secondly, it puts us in the lead in North America, expected to have the fastest growth following Europe. Thirdly, it further improves our position in China, where we are already in production with two OEMs and expect rapidly increasing business in the years to come. With this latest order, we can with confidence re-iterate our stated ambition to have a global market share of at least 40% long term.”

The >40% market share statement is more or less in line with Redeye’s old 38% market share estimate in 2029. Consequently, although the deal is undeniably positive, much of it was already included in our forecasts, as we regard Smart Eye as the market leader in the DMS space. We thus make only a small adjustment to the market share estimate going forward. Instead, we view the actual press release as more of a confirmation of our original investment thesis. The combined estimated lifetime value from current design wins is now larger than SEK3.835bn. The estimated value over the product lifecycle from possible additional design wins with the car manufacturers on existing platforms is SEK4.075bn.

We had already included a rather high market share before the up to 53 new design wins, amounting to 38% in 2029 (down from 46% in 2022, as we still forecast a gradual decline). This estimate still included many more design wins and a continuation of Smart Eye's market leadership. Following the recent design win bonanza, we increase the market share in 2029 to 39%, upping the average market share between 2022-2029 from 42% to 42.5%.

We raise our subscription price estimate for the rights issue in the base case from SEK30 to SEK35, translating into an approximate discount to today's share price level of about SEK50 of 30%. As the full terms are not yet disclosed, we want to underline that these estimates are only hypothetical and that they will change as soon as the real subscription price is set around January 24. The subscription price of the rights issue will be priced at a customary discount to the theoretical ex-rights price (TERP), which we thus interpret as 30% at the moment. However, we have included ranges to give our readers a sense of how the share price, ultimate discount, and dilution, might impact the base case.

In our bear case, we have put a lower subscription price of SEK30 (up from SEK25 in the previous update) in order to include a somewhat more pessimistic scenario where the share price sinks back to lower levels again and thus creates a larger dilution rate. We use a subscription price of SEK40 in our bull case to simulate a scenario where Smart Eye would continue reporting positive news or where the discount rate is lower compared to the current share price level.