Invisio reported revenue of SEK270m for Q2 2023 which was c10% below our forecast of SEK300m owing to lower deliveries than expected. The company comments that deliveries are always made in line with customer needs and wishes, which can impact sales on a quarterly basis. Looking into Q3, high inventories of SEK196m compared to SEK148m in Q2 2023 suggests potential for strong deliveries in the coming quarters. Owing to the lower-than-expected sales, EBITDA came in c24% below our forecast. The gross margin was solid at 60.5% while total opex of SEK118m was somewhat above our forecast of SEK113m. The table below summarize our estimates and the outcome for Q2 2023E.

Invisio continued to see strong demand with a new record order intake of SEK402m for the quarter (we expected around SEK300m) and on a rolling twelve months basis the order intake was SEK1.3bn. The strong order intake was supported by a high volume of unannounced orders (totalling c SEK182m) and Racal which generated Invisio’s largest order ever for SEK130m from the US Department of Defence as well as an order worth SEK90m from a European NATO country. Most of the deliveries for both orders are expected to be delivered during 2023 and Invisio furthermore states that the majority of its orderbook of SEK190m is expected to be deliver during 2023. Additionally, the company maintains its positive outlook expecting strong sales, order intake and profitability for 2023. The longer-term outlook is positive as well with growing defence spending which is likely to remain high for a long time to come.

While Invisio’s Q2-results came in somewhat lower than expected, the outlook for the rest of 2023 and beyond remains bright. We expect deliveries to be strong in Q3 which should offset the lower-than-expected levels seen in Q2 and we slightly raise our 2023E topline forecast with 2%. With potential for continued strong order intake we have also slighty increased our 2024-25E revenue forecast with c4%. However, cost growth was also somewhat higher than expected in Q2 and we have increased our cost assumptions as well which results in EBITDA being largely unchanged for 2023-25E. We still see potential for the company to expand profitability as topline growth should be higher than cost growth.

With limited changes to estimate our valuation range is unchanged where the base case of SEK260 while the bull case stands at SEK400 and the bear cast at SEK140. 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).