smart eye - amazon web services
TRANSCRIPT
Important information: All information regarding limitation of liability and potential conflicts of interest can be found at the end of the report Redeye, Mäster Samuelsgatan 42, 10tr, Box 7141, 103 87 Stockholm. Tel. +46 8-545 013 30, E-post: [email protected]
Update
Equity Research 31 May 2021
KEY STATS
Ticker SEYE.ST Market First North
Share Price (SEK) 263.0 Market Cap (MSEK) 5244 Net Debt 21E (MSEK) -87 Free Float 84 %
BEAR BASE BULL 170
340
405
KEY FINANCIALS (SEK)
2019 2020 2021E 2022E 2023E 2024E Net sales 50 65 123 345 741 1170 EBITDA -87 -56 -65 -40 300 625 EBIT -106 -77 -88 -74 257 581
EPS (adj.)
2019 2020 2021E 2022E 2023E 2024E EPS (adj.) -7.0 -4.7 -4.4 -3.7 12.5 22.5 EV/Sales 32.9 52.1 41.9 15.3 6.8 3.9 EV/EBITDA -18.8 -60.9 -79.2 -131.2 16.7 7.3 EV/EBIT -15.5 -44.0 -58.4 -70.8 19.5 7.9 P/E -16.8 -46.5 -59.3 -70.2 21.0 11.7
ANALYSTS
Jesper Henrikson [email protected]
54
2
0
50
100
150
200
250
300
28-maj 26-aug 24-nov 22-feb 23-maj
OMXS 30
Smart Eye
The AI Powerhouse for Interior Sensing Redeye is very positive to Smart Eye’s acquisition of Affectiva. We believe the acquisition
combines two best-of-breed technologies for different and essential parts of Interior Sensing.
We argue that the acquisition improves Smart Eye’s potential in Interior Sensing, which
results in raised estimates and valuation.
Smart Eye acquires Boston-based Affectiva (read our note here). We believe Affectiva’s
technology for Emotion AI and Human Perception AI will play a major role in winning the
battle of Interior Sensing.
Showing ambitions far beyond DMS – less of a one-trick pony
Through the acquisition of Affectiva, Smart Eye is taking a big step from DMS to Interior
Sensing. What’s more, it showcases the grand ambitions of CEO Martin Krantz of not
settling with being market leader in DMS, but that he and the team want to build something
much greater than that. We sense that Smart Eye is transforming from a “one-trick pony”
into a broader technology company with big ambitions.
Becoming a one-stop-shop for interior sensing – faster to market with higher quality
The acquisition brings together a best-of-breed DMS with a state-of-the-art emotion
detection (Emotion AI) and Human Perception AI. The acquisition brings Smart Eye closer
to completing the “checklist” of functionalities required in upcoming Interior-Sensing RFQs.
Also, we believe DMS and emotion detection are some of the most complex functionalities
on this checklist, something that gives Smart Eye a head start over competition.
Interior Sensing just about to start – premium OEMs first out to announce design wins
The market for Interior Sensing is just about to start. All the premium OEMs from especially
Europe will likely be first out to nominate design wins for Interior Sensing. We believe
previously announced design wins in Interior Sensing is not “real” Interior Sensing. Instead,
the premium OEMs, mentioned above, will likely be the first ones to look into this.
Raising fair-value range – higher ASP and lower downside risk from being one-trick pony
With Affectiva, we believe Smart Eye will take a larger share of the Interior-Sensing market.
Increased belief in Interior Sensing leads to higher ASP estimates. As Smart Eye is
becoming less of a “one-trick pony”, the downside risk is reduced. Our new base case is
SEK 340 (SEK 322), bear case is SEK 170 (SEK 143), and bull case is SEK 405 (SEK 376).
Smart Eye Sector: Autotech
REDEYE RATING
SEYE.ST VERSUS OMXS30
FAIR VALUE RANGE
Financials
People
Business
REDEYE Equity Research Smart Eye 31 May 2021
2
Affectiva – inventor of Emotion AI Affectiva was founded in 2009 by Dr. Rana el Kaliouby and Professor Rosalind Picard. The
company was spun out of MIT Media Lab through a research project. The founders invented
the area of affective computing – AI for recognizing human emotions. When the technology
got enough commercial interest, it was spun out as a company.
Emotion AI means gathering data on a person’s facial expressions and recognizing the
emotions that the facial expressions imply. In that way, the technology can sense if a person
is happy, angry, stressed, and much more.
Several years ago, when entering the Automotive market, Affectiva broadened its AI to detect
much more than emotions. Affectiva also detects people’s cognitive states (advanced
drowsiness and distraction, attention, cognitive overload etc.), where in the car people are
sitting (occupancy), their activities (e.g. using cellphone) and objects they use (e.g. child seat,
device). This is what goes under the term of Human Perception AI.
Three business areas – but clear focus on in-cabin sensing for Automotive Affectiva has three business areas: Automotive AI (in-cabin sensing), Media Analytics, and
Human Factors Research.
Human Factors Research – way of staying in tune with state-of-the-art research
The Human Factors Research complements Smart Eye’s Research Instruments. We don’t
see any large revenue potential in this space but view it as a way of staying in tune with
current state-of-the-art research in the field of Emotion AI.
Media Analytics – stable revenues, reasonable growth, and improves technology by
feeding AI with data
The Media Analytics business analyzes consumer’s emotional reactions to brand content and
experience. This is currently the largest business area, with stable revenues from especially
large advertisers. The customer base is impressive, consisting of roughly 25% of Fortune
Global companies and 70% of the World’s largest advertisers.
What is more, through the operations of this business unit, large amounts of data on people’s
facial expressions connected to their emotional reactions and engagements are collected.
This data is then fed to the AI algorithms (i.e. the “AI motor”) which then continuously
improves its accuracy.
Automotive AI – in-cabin sensing with outstanding performance in emotion interpretation
The clear focus of Affectiva is the in-cabin sensing offering, which targets the market for
Interior Sensing. As we have mentioned earlier, Interior Sensing is an umbrella term for in-
cabin sensing (same as occupant monitoring) and driver monitoring, i.e. DMS. In short,
Affectiva's software detects the state of the driver, the state of the occupants, and the state
of the cabin.
As Interior Sensing is just in its infancy and no real design wins have yet been nominated
(more on this later), Affectiva does not yet have any material revenues in this leg (nor any
design wins). You could say that Affectiva was too early for the ramp up of Interior Sensing
as the market only focused on DMS, and it was too late to that party.
If Smart Eye would not have acquired Affectiva, it would have been a direct competitor
withing Interior Sensing.
dsfdsf REDEYE Equity Research Smart Eye 31 May 2021
3
Data, AI/ML, and detection of emotional and cognitive states are reasons behind acquisition Affectiva has great capabilities in Emotion AI and Human Perception AI. These are
technologies that will immediately improve and expand Smart Eye’s technological
functionality.
Except just the current functionality of Affectiva’s technology, the acquisition is a big step
towards improved and better AI/ML capabilities. Artificial Intelligence (AI) and Machine
Learning (ML) are at the very core of making sure that the functionalities of tomorrow are top
class.
Affectiva’s data resources and AI/ML capabilities are keys to enabling Smart Eye to staying
ahead of competition also in the years to come. First, Affectiva has state-of-the-art data
acquisition, mainly acquired from its Media Analytics unit. Second, Affectiva has large data
repositories (i.e. data library) which act as resources for improving the AI. Last, Affectiva has
vast capabilities in data annotation, which is the last piece in the puzzle to train an AI/ML
model.
We have previously mentioned that Seeing Machines often highlights its large data sets to be
key for being able to develop great AI. We believe Smart Eye’s acquisition of Affectiva puts
the company in an even better position in regard to this competitive edge.
Good cultural fit and strong team – “more of a merger than an acquisition”
High degree of science and technological height in the team Our impression is that Affectiva has a very strong team with a high level of science integrated
at its core. Co-Founder and CEO, Rana el Kaliouby has a PhD in computer science at
Cambridge and a Post-Doc degree in computer science at MIT. The other co-founder,
Rosalind Picard, was already a pioneer in the field of affective computing when she was a
professor at MIT. She founded the Affective Computing Research Group at MIT, of which she
is now director. Also, the rest of the team seems strong with several employees coming from
Nuance, a hyped tech company within speech recognition.
Values driven at its core Rana el Kaliouby is very passionate and is eager to make good, and not bad, things with the
technology that her company possesses. The first real use case that she went after was a
technological aid for persons with autism. The solution was like a pair of Google Glasses that
helped the person with autism to interpret social codes and interactions with other people,
enabling the person to reach a higher EQ.
Also, Affectiva has been approached by e.g. governments wanting to use the technology as a
lie detector and similar applications, but Affectiva has always stood its ground to do good
things and not bad.
Our impression is that the passion for a higher cause is shared in the organization and acts
as a Northern Star that guides the company.
dsfdsf REDEYE Equity Research Smart Eye 31 May 2021
4
Cultural fit and the same vision – automotive first, then expansion One of the early investors of Affectiva was the Wallenberg family, which connected Swede
Hans Lindroth with Affectiva and later became Chairman of the board at the company. Mr.
Lindroth knew about Smart Eye and connected the two companies two to three years ago.
Martin Krantz knew about Affectiva since way before this, but since Lindroth put the two
companies in contact, they have held contact and now finally decided to come together.
A promising sign is that the CEO of Smart Eye views the acquisition as more of a merger than
an acquisition. The two companies are also keen to make a clean and positive integration
process to create one single team.
Last, both Smart Eye and Affectiva share the same vision, i.e. automotive first then expansion
into new areas.
Lock-up period: 50% for one year and 50% for two years As the payment mainly consists of shares in Smart Eye, many large existing owners will own
shares in Smart Eye. 75% of previous owners are institutional investors and VCs, and the
remaining 25% are private owners, mainly founders and management.
The institutional investors and VCs will have a lock-up period of one year for half of the
shares, and two years for the remaining half. As many of the private owners have become
shareholders through stock-option programs, they will need to pay tax for their options
turning into shares. Because of this, private owners (incl. management) can sell one third of
their shares directly. Half of the remaining shares are locked up for one year and the last part
is locked up for two years, i.e. the same deal as for remaining shareholders.
Creating an AI powerhouse for Interior Sensing
Head start on Interior-Sensing checklist – undisputed leader in two toughest areas Interior Sensing is in the starting pit to becoming something that all OEMs must address. To
be able to know what specific functions that are required, there is a checklist of what needs
to exist in the car. This checklist is not public and thus we don’t know the exact specifics.
Except DMS, we have heard from industry experts that detection of emotional and cognitive
states (i.e. Affectiva’s specialties) are other such required functions. The list of things
required is likely long, and some things will likely be optional.
DMS and emotion detection likely most complicated functions – big USP for Smart Eye
Out of this long checklist of required functionality, we believe DMS and detection of emotional
and cognitive states are among the most complicated and hardest to deliver. Just as Smart
Eye has focused on becoming best-of-breed at eye-tracking of the driver, Affectiva is best-of-
breed at detecting the emotional and cognitive state of the driver. Apart from this, both Smart
Eye’s and Affectiva’s technologies can do many of the other parts of Interior Sensing, but in
the mentioned areas the combination really excels.
While some players will be mediocre, at best, on at least one of the core functions, Smart Eye
will stand out in both.
Leapfrogging to a head start over competition
The Interior-Sensing checklist contains several functions that are must-haves and some that
are nice-to-haves. Amongst the must-haves, we believe DMS and detection of emotional and
cognitive states are among the toughest ones to get a proper solution for. Through the
acquisition of Affectiva, Smart Eye is closing in on having finished this list. Affectiva thus
provides Smart Eye with a big head start over competition, both in terms of time-to-market
and quality.
dsfdsf REDEYE Equity Research Smart Eye 31 May 2021
5
”By joining forces, we kind of check all the boxes for what the OEMs are looking for with
interior sensing, we leapfrog the competition and we have an opportunity to do this better and
faster than we could have done it on our own.” – Dr. Rana el Kaliouby, CEO of Affectiva
Multi modular approach likely with several cameras and complementing technology
There are functions such as detecting a child under a blanket which will require radar (to
detect heart beats). We believe OEMs are moving towards a multi modular approach with
several cameras plus a radar. Hence, we believe the market for Interior Sensing will contain a
mix of several different technologies. However, the combination of camera plus radar should
solve 99% of all use cases.
Module-based one-stop-shop for Interior Sensing Going forward, Smart Eye will have a module-based business model where OEMs (or Tier 1s)
will be able to include the functions they want. Some will only want what is required by law,
while some will want to include functionality that enhances driver/ passenger experience.
Whatever the customer desires, Smart Eye will be able to offer this.
As we have said before, sometimes it’s the Tier 1 that assembles the tech in a car, whereas
other times it’s the OEM that says what technological solution it wants and from what
provider. Smart Eye’s approach is to aim for the latter example.
Market going forward – design wins soon to be nominated from premium OEMs The market for Interior Sensing is just about to get going. Smart Eye’s CEO, Martin Krantz,
said in an interview that the market for Interior Sensing is where the DMS market was in 2014
to 2015. This means that all the premium OEMs from especially Europe (e.g. Mercedes,
BMW, Audi, Porche, etc.) will be first out to nominate design wins for Interior Sensing. Some
non-European OEMs, such as Cadillac or Lexus, could also be quick to follow suit.
We have previously mentioned some minor design wins already having been nominated for
Interior Sensing. On a second thought, after having conferred with industry sources, we
believe these design wins not to be “real” Interior Sensing. Instead, the premium OEMs,
mentioned above, will likely be the first ones to look into this.
Increased scope in Interior Sensing increases potential revenue per car As Interior Sensing includes several features, where DMS is just one of these, the market
potential will be higher than for DMS only. The number of potential cars will naturally be the
same but the potential revenue per car will be higher. How much higher remains to be seen
but Martin Krantz said to Dagens Industri that the market for Interior Sensing will be 3x bigger
than that of DMS. As the rollout of Interior Sensing will start to happen a few years away, we
believe this statement regards the market size in 2030. It would then imply that DMS has a
first strong wave, which then translates into Interior Sensing that then becomes even greater.
DMS market quickly transferring into Interior Sensing – are competitors ready? As we have stated, Smart Eye is getting closer to completing the checklist of what needs to
be in placed to offer a complete Interior-Sensing solution. Also, with a best-of-breed DMS and
state-of-the-art emotion-detection and cognitive state-detection technologies, Smart Eye gets
a head start to competitors.
At the same time, the automotive industry’s attention is quickly turning from DMS to Interior
Sensing. The industry attention switching to Interior Sensing, combined with Smart Eye
getting a head start, surely provide some headache for competitors trying to keep up.
dsfdsf REDEYE Equity Research Smart Eye 31 May 2021
6
Showcasing Smart Eye’s and Martin Krantz’s grand ambitions – far bigger than just DMS The acquisition of Affectiva is a clear sign of Smart Eye having bigger ambitions than just
being market leader in DMS. We believe some investors have worried about Smart Eye being
a “one-trick pony”, i.e. only having one leg to stand on. We argue that the Affectiva acquisition
does not just move Smart Eye into Interior Sensing, but it also shows that automotive is just
the beginning. What the future Smart Eye will look like when the Interior-Sensing market has
matured remains to be seen, but we are certain that automotive is just the beginning.
dsfdsf REDEYE Equity Research Smart Eye 31 May 2021
7
Estimates With the acquisition of Affectiva, we believe Smart Eye will take a larger share of the Interior-
Sensing market. We have previously estimated that ASP (average selling price) per car would
decline rather swiftly from 2026 and on as there will be price pressure on DMS. Now we see
the possibility of not only maintaining the ASP, but maybe even raising it over time as Interior
Sensing takes a larger share. This is shown in our new base case, but especially in our new
bull case.
As Smart Eye is becoming less of a “one-trick pony”, the downside risk in the company is
reduced. This leads us to increase our estimates for our bear case.
On the revenue side, we raise our ASP from 2026 and on, as well as adding the revenue from
Affectiva with a 10% annual growth in the next four years. On the cost side, we don’t know the
cost base of Affectiva, but we make assessment based on the number of employees.
REDEYE Equity Research Smart Eye 31 May 2021
8
Investment Case In pole position within eye tracking for mandated driver monitoring
Impatient & short-term focused stock market
Design wins to move the share price
In pole position within eye tracking for mandated driver monitoring
Due to EU and Euro NCAP's decisions to mandate driver monitoring, the market for driver monitoring systems
(DMS) is about to explode. This expected growth is a known fact for the stock market but we believe many do not
understand Smart Eye’s strong positioning. Smart Eye has devoted ~20 years of 100 percent focus to and
investments in this very niche. The company is in pole position with an unmatched 84 design wins for 13 car OEMs.
As for barriers to entry, the technology needs to cope with e.g. changing light conditions, tunnels, sunshine,
darkness, vibrations etc. and at the same time never fail. Competition is therefore basically limited to one other tier-
2 player aside of the tier-1 customers’ own solutions. However, we believe it is unlikely that the customers in the
long run are willing to put up with all investments and maintain the focus necessary for in house sourcing. Smart
Eye states that, being platform independent and hardware agnostic, it has a competitive edge as its technology can
be locked late in the development process.
Impatient & short-term focused stock market
Smart Eye’s first design wins with new customers are in general worth a lot more than what meets the eye as they
are platform based. The platforms will usually (although not automatically) yield additional new car models for
every year over the platforms’ lives of about 10 years. In addition, each car model lives around seven years. For
Smart Eye this creates a very foreseeable and stable revenue stream for many years to come as the large switching
costs provide solid barriers to entry. The stock market however, as always, only sees the coming few quarters,
meaning significant potential for patient, long term investors.
Design wins to move the share price
We expect a steady news flow going forward with design wins from already won procurements as well as RFQ’s
worth SEK billions in progress for the next quarters, which should drive the share price.
REDEYE Equity Research Smart Eye 31 May 2021
9
Valuation
Bear Case 170 SEK Base Case 340 SEK Bull Case 405 SEK The main differences in our bear case compared to our base case scenario are the following. In our reasonably pessimistic scenario we expect an 8 percent lower take rate (DMS penetration) growth across the board and a slower volume growth of 59% in Automotive Solutions, which is related to delays in legislation or setbacks or in the work of the other NCAP organizations around the world meaning a slower adoption rate. We believe that Smart Eye in a bear case still can defend its solid position and existing customers, with the exception of BMW. We see a decent traction in China, but we assume Smart Eye's overall win rate and long-term market shares drop to 20%. All in all, the factors mentioned above mean a total sales CAGR growth of 43% during 2021-2028. As for the fixed costs we expect Smart Eye to hold back on investing as the market breakthrough is delayed, meaning the growth in OPEX is only CAGR 19%, which translates into an EBIT margin of about 40% in 2023. We expect that the EBIT would then gradually reach 22% as a long-term, sustainable EBIT margin.
Our base scenario (base case) is based on the following assumptions for 2021-2028. A discount rate of 9% is used in all three scenarios In our base case we assume a CAGR volume growth for Automotive Solutions of about 61% leading up to about 24 million licenses, which we believe is equivalent to about 35% market share, which should be compared to the company's target of 40 percent on a likely much higher TAM than us. We assume that existing customers can account for over three fourths of the volumes. Even though Smart Eye has a competitive offering and competition will remain limited we believe that its bargaining and pricing power against the huge tier 1 players are rather limited. We assume the DMS ASP will decrease by a CAGR of -9% per year. We assume stable DMS prices during the first years and a double-digit drop from EUR 7 to EUR 4 between 2025 and 2028. However, expect Interior Sensing to have about 65% higher pricing than DMS, meaning the blended ASP for 2028 is EUR 5. In Research Instruments we assume Smart Eye can grow 11%, in line with the market and thus keep its current market shares of 4-5%. All in all, the factors mentioned above mean a total sales CAGR growth of 48% during 2021-2028. As for the fixed costs we expect them to grow by a 22% CAGR growth, which translates to an EBIT margin of around 13% in 2022. However, in 2023 we expect the EBIT margin to be about 50%. EBIT will then after 2025 start dropping towards the long-term, sustainable EBIT margin of 34%.
The important differences in our bull case compared to our base case are the following: In our reasonably optimistic scenario we assume 10 percent faster growth in take rate penetration as in our base case, driven especially by standard fitment in mid class from rapid NCAP inclusions around the world and China where Smart Eye maintains a strong positioning, meaning close to 26 million licenses in 2028. We expect a 30%-win rate in China of about 40% for non-Chinese OEMs. As for Research Instruments we expect that Smart Eye in bull case can grow faster than the market (18%) and increase its market share from 4 % to 10 %. All in all, the factors mentioned above mean a total sales CAGR growth of 50% during years 2021-2028. As for the fixed costs we expect Smart Eye to invest more in additional opportunities (most notably retrofit systems for Chinese commercial vehicles) encouraged by its success, which would imply a 23% CAGR growth in OPEX and EBIT margins that average 50% during 2023-2028. We expect that the EBIT margin could then reach 36% as a long-term, sustainable EBIT margin.
REDEYE Equity Research Smart Eye 31 May 2021
10
Catalysts Toyota win
The Toyota procurement will be finished imminently. Toyota sells almost 11 million vehicles per year and is the
World's largest car OEM, meaning significant catalyst potential if Smart Eye would win Toyota.
IMPACT Downside Upside Time Frame
Significance Likelihood Significance Likelihood Moderate Possible Major Possible Short
Design wins in China
We believe there are design wins overdue in China where Smart Eye's tier-1 partner has been selected and only
paperwork remains before Smart Eye is officially nominated.
IMPACT Downside Upside Time Frame
Significance Likelihood Significance Likelihood Moderate Unlikely Moderate Highly likely Short
Design wins and follow-up orders in general
The major key catalyst in general is won contracts from the many RFQ’s worth in total SEK 6 billion, which should
drive the share price. In addition, we expect follow-up orders from existing customers.
IMPACT Downside Upside Time Frame
Significance Likelihood Significance Likelihood Minor Unlikely Moderate Highly likely Short
REDEYE Equity Research Smart Eye 31 May 2021
11
Summary Redeye Rating The rating consists of three valuation keys, each constituting an overall assessment of several factors that are rated
on a scale of 0 to 1 point. The maximum score for a valuation key is 5 points.
Rating changes in the report
People: 5
Smart Eye is governed by an owner operator as the co-founder is the CEO, which is positive in many ways. Compensation is
moderate and just. We especially like the tendency to include all employees in the stock option programs, which indicates a
healthy HR policy that could explain the relatively low employee turnover. The solid growth trend during the years prior to the
listing implies that so far investments have been savvy and execution essentially flawless. Overall, the Management score is
hampered by Smart Eye's short period on the stock market where e.g. there is not much history of Smart Eye's communication to
the shareholders as a listed company. As mentioned, Smart Eye is governed by owner operators where the founding family (Martin
& Mats Krantz) together owns ~15% of the company. Overall, insiders in the Board as well as Management own a lot of shares
and keep on adding to their positions. The founding family really has put their money where their mouths are. Thus, the ownership
structure is in short very appealing. Our only concern is if there are enough financial muscles to back up the Company should there
be need for future supplementary investments.
Business: 4
Smart Eye is the market leader in a viable niche within driver monitoring that is expected to grow at a CAGR of about 200 percent
until 2025, especially driven by autonomous vehicles and traffic safety. Following an 18 year focus in automotive Smart Eye has
established important relations with all potential tier 1 customers. Smart Eye's automotive focus and the recurring software
licenses together imply sticky and predictable revenue for the foreseeable future. In addition, high barriers to entry mean limited
competition. All in all, it is a great business.
Financials: 2
Our profitability rating is fully retrospective and requires consistent, positive earnings. As Smart Eye is not profitable at the
moment it therefore cannot have a higher score for now. However, Smart Eye has a scalable business model with low costs,
meaning the stage is set for a gradually increased rating ahead should the Company keep up its growth trend. The cash position
and liquidity measurements of Smart Eye seems solid following a SEK 200 million private placement in 2019. However, Smart Eye
loses some points as the company at the moment has negative earnings and cash flow. In addition, there is a risk in the cyclicality
of the automotive industry as the customers must be able to afford to fully embrace the new driver monitoring technology.
However, the amount of customers and their respective share of total sales is reasonably diversified.
REDEYE Equity Research Smart Eye 31 May 2021
12
PROFITABILITY 2019 2020 2021E 2022E 2023E ROE -51% -26% -29% -33% 81% ROCE -50% -25% -29% -30% 76% ROIC -128% -72% -65% -42% 118% EBITDA margin -175% -86% -53% -12% 41% EBIT margin -212% -119% -72% -22% 35% Net margin -214% -119% -72% -22% 34%
Please comment on the changes in Rating factors……
INCOME STATEMENT 2019 2020 2021E 2022E 2023E Net sales 50 65 123 345 741 Total operating costs -137 -121 -188 -385 -441 EBITDA -87 -56 -65 -40 300 Depreciation -2 -2 -2 -2 -2 Amortization -17 -19 -21 -33 -42 Impairment charges 0 0 0 0 0 EBIT -106 -77 -88 -74 257 Share in profits 0 0 0 0 0 Net financial items -1 0 0 -1 -1 Exchange rate dif. 0 0 0 0 0 Pre-tax profit -106 -77 -88 -75 256 Tax 0 0 0 0 0 Net earnings -106 -78 -88 -75 256
BALANCE SHEET 2019 2020 2021E 2022E 2023E Assets Current assets Cash in banks 145 219 87 17 231 Receivables 32 29 51 121 252 Inventories 4 5 7 17 33 Other current assets 0 0 0 0 0 Current assets 181 253 146 155 516 Fixed assets Tangible assets 6 4 5 7 13 Associated comp. 0 0 0 0 0 Investments 0 0 0 0 0 Goodwill 0 0 0 0 0 Cap. exp. for dev. 0 0 0 0 0 O intangible rights 110 130 171 231 241 O non-current assets 0 0 0 0 0 Total fixed assets 116 134 176 238 254 Deferred tax assets 0 0 0 0 0 Total (assets) 297 386 322 393 771 Liabilities Current liabilities Short-term debt 0 0 0 0 0 Accounts payable 44 32 58 159 326 O current liabilities 0 0 0 0 0 Current liabilities 44 32 58 159 326 Long-term debt 2 2 0 46 0 O long-term liabilities 0 0 0 0 0 Convertibles 0 0 0 0 0 Total Liabilities 46 34 58 204 326 Deferred tax liab 0 0 0 0 0 Provisions 0 0 0 0 0 Shareholders' equity 252 353 264 189 444 Minority interest (BS) 0 0 0 0 0 Minority & equity 252 353 264 189 444 Total liab & SE 297 386 322 393 771
FREE CASH FLOW 2019 2020 2021E 2022E 2023E Net sales 50 65 123 345 741 Total operating costs -137 -121 -188 -385 -441 Depreciations total -19 -21 -23 -34 -44 EBIT -106 -77 -88 -74 257 Taxes on EBIT 0 0 0 0 0 NOPLAT -106 -77 -88 -74 257 Depreciation 19 21 23 34 44 Gross cash flow -87 -56 -65 -40 300 Change in WC 6 -10 1 21 20 Gross CAPEX -50 -40 -66 -96 -60 Free cash flow -131 -105 -130 -115 260
CAPITAL STRUCTURE 2019 2020 2021E 2022E 2023E Equity ratio 85% 91% 82% 48% 58% Debt/equity ratio 1% 0% 0% 24% 0% Net debt -144 -217 -87 28 -231 Capital employed 108 136 177 217 214 Capital turnover rate 0.2 0.2 0.4 0.9 1.0
GROWTH 2019 2020 2021E 2022E 2023E Sales growth -2% 31% 89% 180% 115% EPS growth (adj) 47% -34% -5% -16% -434%
DATA PER SHARE 2019 2020 2021E 2022E 2023E EPS -7.04 -4.66 -4.44 -3.75 12.51 EPS adj -7.04 -4.66 -4.44 -3.75 12.51 Dividend 0.00 0.00 0.00 0.00 0.00 Net debt -9.51 -13.05 -4.38 1.41 -11.30 Total shares 15.12 16.63 19.94 20.14 20.44
VALUATION 2019 2020 2021E 2022E 2023E EV 1,640.3 3,391.9 5,156.7 5,272.4 5,013.1 P/E -16.8 -46.5 -59.3 -70.2 21.0 P/E diluted -16.8 -46.5 -59.3 -70.2 21.0 P/Sales 35.8 55.4 42.6 15.4 7.3 EV/Sales 32.9 52.1 41.9 15.3 6.8 EV/EBITDA -18.8 -60.9 -79.2 -131.2 16.7 EV/EBIT -15.5 -44.0 -58.4 -70.8 19.5 P/BV 7.1 10.2 19.8 27.8 11.8
SHARE INFORMATION Reuters code SEYE.ST List First North Share price 263.0 Total shares, million 19.9 Market Cap, MSEK 5243.9 MANAGEMENT & BOARD CEO Martin Krantz CFO Anders Lyrheden IR TBA Chairman Anders Jöfelt FINANCIAL INFORMATION ANALYSTS Redeye AB Jesper Henrikson Mäster Samuelsgatan 42, 10tr [email protected] 111 57 Stockholm
SHARE PERFORMANCE GROWTH/YEAR 18/20E 1 month -1.9 % Net sales 57.1 % 3 month 24.1 % Operating profit adj -8.6 % 12 month 186.2 % EPS, just -20.6 % Since start of the year 21.2 % Equity 2.5 %
SHAREHOLDER STRUCTURE % CAPITAL VOTES Swedbank Robur Fonder 7.0 % 7.0 % Mats Krantz inklusive närstående 7.0 % 7.0 % Första AP-fonden 6.7 % 6.7 % Anders Jöfelt 5.2 % 5.2 % Martin Krantz 5.2 % 5.2 % Linda Jöfelt 4.7 % 4.7 % Niclas Eriksson med närstående 4.6 % 4.6 % Avanza Pension 3.7 % 3.7 % Handelsbanken Fonder 3.6 % 3.6 %
DCF VALUATION CASH FLOW, MSEK WACC (%) 9.0 % NPV FCF (2020-2021) -15 NPV FCF (2022-2028) 2651 NPV FCF (2029-) 3923 Non-operating assets 219 Interest-bearing debt -2 Fair value estimate MSEK 6777 Assumptions 2020-2026 (%) Average sales growth 58.6 % Fair value e. per share, SEK 339.9 EBIT margin 22.0 % Share price, SEK 263.0
REDEYE Equity Research Smart Eye 31 May 2021
13
Redeye Rating and Background Definitions Company Quality
Company Quality is based on a set of quality checks across three categories; PEOPLE, BUSINESS, FINANCE. These
are the building blocks that enable a company to deliver sustained operational outperformance and attractive long-
term earnings growth.
Each category is grouped into multiple sub-categories assessed by five checks. These are based on widely
accepted and tested investment criteria and used by demonstrably successful investors and investment firms. Each
sub-category may also include a complementary check that provides additional information to assist with
investment decision-making.
If a check is successful, it is assigned a score of one point; the total successful checks are added to give a score for
each sub-category. The overall score for a category is the average of all sub-category scores, based on a scale that
ranges from 0 to 5 rounded up to the nearest whole number. The overall score for each category is then used to
generate the size of the bar in the Company Quality graphic.
People
At the end of the day, people drive profits. Not numbers. Understanding the motivations of people behind a business
is a significant part of understanding the long-term drive of the company. It all comes down to doing business with
people you trust, or at least avoiding dealing with people of questionable character.
The People rating is based on quantitative scores in seven categories:
• Passion, Execution, Capital Allocation, Communication, Compensation, Ownership, and Board.
Business
If you don’t understand the competitive environment and don’t have a clear sense of how the business will engage
customers, create value and consistently deliver that value at a profit, you won’t succeed as an investor. Knowing
the business model inside out will provide you some level of certainty and reduce the risk when you buy a stock.
The Business rating is based on quantitative scores grouped into five sub-categories:
• Business Scalability, Market Structure, Value Proposition, Economic Moat, and Operational Risks.
Financials
Investing is part art, part science. Financial ratios make up most of the science. Ratios are used to evaluate the
financial soundness of a business. Also, these ratios are key factors that will impact a company’s financial
performance and valuation. However, you only need a few to determine whether a company is financially strong or
weak.
The Financial rating is based on quantitative scores that are grouped into five separate categories:
• Earnings Power, Profit Margin, Growth Rate, Financial Health, and Earnings Quality.
REDEYE Equity Research Smart Eye 31 May 2021
14
Redeye Equity Research team
Management Björn Fahlén
Technology Team Jonas Amnesten
Henrik Alveskog
Fredrik Nilsson
Tomas Otterbeck
Jesper Henrikson
Viktor Westman
Forbes Goldman
Mark Siöstedt
Danesh Zare
Mattias Ehrenborg
Editorial Mark Siöstedt
Joel Karlsson
Life Science Team Gergana Almquist
Oscar Bergman
Anders Hedlund
Ludvig Svensson
Niklas Elmhammer
Mats Hyttinge
Filip Einarsson
Fredrik Thor
REDEYE Equity Research Smart Eye 31 May 2021
15
Disclaimer Important information Redeye AB ("Redeye" or "the Company") is a specialist financial advisory boutique that focuses on small and mid-cap growth companies in the Nordic region. We focus on the technology and life science sectors. We provide services within Corporate Broking, Corporate Finance, equity research and investor relations. Our strengths are our award-winning research department, experienced advisers, a unique investor network, and the powerful distribution channel redeye.se. Redeye was founded in 1999 and since 2007 has been subject to the supervision of the Swedish Financial Supervisory Authority. Redeye is licensed to; receive and transmit orders in financial instruments, provide investment advice to clients regarding financial instruments, prepare and disseminate financial analyses/recommendations for trading in financial instruments, execute orders in financial instruments on behalf of clients, place financial instruments without position taking, provide corporate advice and services within mergers and acquisition, provide services in conjunction with the provision of guarantees regarding financial instruments and to operate as a Certified Advisory business (ancillary authorization). Limitation of liability This document was prepared for information purposes for general distribution and is not intended to be advisory. The information contained in this analysis is based on sources deemed reliable by Redeye. However, Redeye cannot guarantee the accuracy of the information. The forward-looking information in the analysis is based on subjective assessments about the future, which constitutes a factor of uncertainty. Redeye cannot guarantee that forecasts and forward-looking statements will materialize. Investors shall conduct all investment decisions independently. This analysis is intended to be one of a number of tools that can be used in making an investment decision. All investors are therefore encouraged to supplement this information with additional relevant data and to consult a financial advisor prior to an investment decision. Accordingly, Redeye accepts no liability for any loss or damage resulting from the use of this analysis. Potential conflict of interest Redeye’s research department is regulated by operational and administrative rules established to avoid conflicts of interest and to ensure the objectivity and independence of its analysts. The following applies:
• For companies that are the subject of Redeye’s research analysis, the applicable rules include those established by the Swedish Financial Supervisory Authority pertaining to investment recommendations and the handling of conflicts of interest. Furthermore, Redeye employees are not allowed to trade in financial instruments of the company in question, from the date Redeye publishes its analysis plus one trading day after this date.
• An analyst may not engage in corporate finance transactions without the express approval of management and may not receive any remuneration directly linked to such transactions.
• Redeye may carry out an analysis upon commission or in exchange for payment from the company that is the subject of the analysis, or from an underwriting institution in conjunction with a merger and acquisition (M&A) deal, new share issue or a public listing. Readers of these reports should assume that Redeye may have received or will receive remuneration from the company/companies cited in the report for the performance of financial advisory services. Such remuneration is of a predetermined amount and is not dependent on the content of the analysis.
Redeye’s research coverage Redeye’s research analyses consist of case-based analyses, which imply that the frequency of the analytical reports may vary over time. Unless otherwise expressly stated in the report, the analysis is updated when considered necessary by the research department, for example in the event of significant changes in market conditions or events related to the issuer/the financial instrument. Recommendation structure Redeye does not issue any investment recommendations for fundamental analysis. However, Redeye has developed a proprietary analysis and rating model, Redeye Rating, in which each company is analyzed and evaluated. This analysis aims to provide an independent assessment of the company in question, its opportunities, risks, etc. The purpose is to provide an objective and professional set of data for owners and investors to use in their decision-making. Redeye Rating (2021-05-31)
Duplication and distribution This document may not be duplicated, reproduced or copied for purposes other than personal use. The document may not be distributed to physical or legal entities that are citizens of or domiciled in any country in which such distribution is prohibited according to applicable laws or other regulations. Copyright Redeye AB.
Rating People Business Financials
5p 20 15 3 3p - 4p 97 76 37 0p - 2p 6 32 83 Company N 123 123 123
CONFLICT OF INTERESTS
Jesper Henrikson owns shares in the company : Yes Redeye performs/have performed services for the Company and receives/have received compensation from the Company in connection with this.