Invisio reported revenue of SEK311m (growth of 127%) for Q1 2023 which was 13% above our forecast of SEK275m. The company saw a strong gross margin of 62.5% (we estimated 58%) supported by product mix and partly as supplier price increases not yet taking effect. Invisio continued to see strong operating leverage with EBITDA coming in at SEK97m (45% above our forecast of SEK66m), giving an EBITDA-margin of 31% (up from 25% in Q1 2023 and 6% in Q1 2022). Order intake was SEK315m (we expected SEK250-300m) and the order book stood at SEK627m at the end of Q1 2023.

Commenting on the outlook, Invisio remains positive and forecasts strong revenue and order intake as well as profitability for 2023. The company says that its strong order intake reflects an increasingly active market driven by growing defence budgets for many countries. Invisio also highlights its investments made during recent years which have put the company in a strong position to meet the growing business opportunities. This includes the Intercom product for which the company has recently received an order of SEK40m from a customer that has now generated SEK100m of Intercom orders in total. Invisio has also seen strong performance from Racal, which saw a break-through order in the US in Q1 where there is potential for additional growth as a competitor has exited the market. Furthermore, the signed framework agreement with a new European Non-NATO country which has received an initial order of SEK40m with potential for more orders over several years.

Overall, the company's product portfolio has expanded in the last years, which in combination with growing defence budgets, supports a strong growth outlook. As such, we believe the jump in the order intake seen in 2022 is probably a starting point for several years of strong growth, as illustrated in the chart below.

With the strong growth seen in the last few quarters, Invisio has illustrated the clear operating leverage that exists in its business model. While investments done during 2021-22 resulted in low profitability as the company suffered from weak sales during covid-19 lockdowns, the company can now reap the benefit from these investments. As illustrated in the chart below, we expect the jump in profitability to remain and even improve somewhat in the coming years with the EBITDA-margin expanding from 27% in 2023 to 29% in 2024E and 32% i 2025E. While the strong gross margin of 62.5% in Q1 2023 was partly boosted by supplier price increases that had not yet taken effect, it was also thanks to an improved product mix which includes the Intercom product. We continue to forecast a gross margin of 60% in the coming years, although there could be additional where the company sees 60-65% as a long-term ambition for the gross margin.

In summary, we raise our 2023E revenue and EBITDA estimates with 9% and 24% respectively on the back of the report. We have also raised 2024-25E forecasts with 7% on topline and 11-13% on EBITDA. The increased estimates also yield an increased valuation range where our new base case stands at SEK260 (SEK230) while the bull case stands at SEK400 (SEK360) and the bear cast at SEK140 (SEK120). Our base case implies an EV/EBITDA of 37x on 2023E and 31x on 2024E forecasts, while the five-year average has been 30x NTM EV/EBITDA (range of 20-50x).

The table below summarise key financials for 2019-2025E.