Kontigo Care: Well-positioned to meet the demand for immediate drug detection
Research Update
2024-08-21
07:13
Redeye reiterates its valuation following the Q2 2024 report, which was stronger than our expectations overall. Given the challenging macro climate, the business performed well, accompanied by solid cost control. The outlook remains cautiously optimistic in the short term. However, we are confident about the potential of the newly launched Previct Drug and Previct Safety, which have garnered significant attention both in Sweden and internationally, as well as from adjacent sectors.
Jessica Grunewald
Martin Wahlström
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Net sales for the quarter were SEK7.5m (7.3), reflecting year-on-year growth of 2% and 2% q/q decrease, 12% above our forecast. We had anticipated that the loss of approximately 100 licenses last quarter would significantly impact net sales in Q2. Monthly Recurring Revenue (MRR) was SEK2.5m, flat q/q and 9% above our estimate. OPEX amounted to SEK8.2m (9.4), 10% below our projected SEK9.1m. Unlike previous reports, this quarter did not include any one-time expenses
In June, Kontigo Care launched Previct Safety, a proactive drug screening tool using eye scans for immediate results, marking a strategic shift from addiction care to early-stage detection. On 15 August, the Swedish government proposed legislation to allow routine eye examinations for drivers, including technical tools like Previct Safety. If the law is enacted, it could increase demand for digital eye examination tools, positioning Kontigo Care favourably for potential tender processes.
We have slightly revised our forecasts, increasing net sales by 6%—from SEK29m to SEK31m—which leads to an estimated EBIT of SEK2m (up from SEK0m) for 2024. Our Base Case valuation remains steady at SEK5.8 per share, with a fair value range of SEK1.1 to SEK12.3 per share. We still expect Previct Drug and Previct Safety to start contributing to growth in Q4, with a more pronounced effect anticipated in 2025.
| SEKm | 2022 | 2023 | 2024e | 2025e | 2026e |
| Revenues | 36.2 | 44.4 | 42.4 | 47.3 | 61.2 |
| Revenue Growth | 32.4% | 22.8% | -4.6% | 11.5% | 29.5% |
| EBITDA | 6.8 | 4.5 | 6.6 | 11.5 | 19.4 |
| EBIT | 2.9 | 0.60 | 1.6 | 2.8 | 11.9 |
| EBIT Margin | 10.2% | 2.1% | 5.3% | 7.3% | 21.5% |
| Net Income | 2.9 | 0.34 | 1.4 | 2.6 | 10.9 |
| EV/Sales | 3.2 | 2.1 | 2.2 | 1.7 | 1.0 |
| EV/EBIT | 31.8 | 102 | 41.7 | 23.3 | 4.8 |
Disclosures and disclaimers
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