Freemelt: Gearing up
Research Update
2024-08-07
07:25
Redeye updates its estimates and valuation following Freemelt’s Q2 report, which came in below our expectations due to the timing effect of printer deliveries and higher opex than expected. The company continues to add new agreements to its portfolio, although printer orders remain relatively muted.
Anton Hoof
Henrik Alveskog
Freemelt’s Q2 report fell short of our expectations and sales amounted to SEK2.4m compared to our estimate of SEK12.4m. The deviation was due to the timing effect of printer deliveries, which have been postponed to H2. Regarding profitability, Freemelt reported an EBITDA of SEK-13.4m and EBIT of SEK-26.7m, which were lower than our estimates of SEK-3.1m and SEK-16.2m, respectively.
Freemelt continues to build its future sales pipeline by signing new agreements. Most orders are for materials/application development projects, which are often the first step in the sales process for industrial printers. Hence, these orders are vital for Freemelt’s future earnings. However. before 2023, Freemelt saw a steady stream of Freemelt ONE orders, contributing to short-term sales and cash flow. While the new agreements indicates increased market traction, we hope to see more Freemelt ONE printer orders in H2 and 2025 to drive cash flow and finance the more long-term orders.
Despite solid commercial activity and new orders, printer orders remain muted, leading us to trim our sales estimates by 9% for 2024e and by 13-9% for 2025e-2026e. Additionally, due to higher-than-expected costs in the quarter, we have revised our cost estimates upwards. We expect new order signings to be the primary driver for the share price, and on that note, Freemelt has good momentum with a new order announced yesterday. Our new base case stands at SEK4.5 (5) and fair value range at SEK1.2-13(1.5-15).
| SEKm | 2022 | 2023 | 2024e | 2025e | 2026e |
| Net Sales | 36.1 | 22.3 | 31.0 | 89.0 | 119.7 |
| Sales Growth | 11830% | -38.3% | 39.1% | 187% | 34.5% |
| EBITDA | -14.3 | -31.3 | -29.5 | 5.4 | 20.8 |
| EBIT | -67.6 | -84.0 | -83.1 | -48.6 | -19.5 |
| EBIT Margin | -187% | -377% | -268% | -54.6% | -16.3% |
| Net Income | -67.5 | -82.9 | -83.0 | -48.6 | -19.5 |
| EV/Sales | 7.6 | 11.3 | 4.6 | 2.0 | 1.8 |
| EV/EBITDA | - | - | -4.8 | 33.8 | 10.2 |
We expected Q2 to be a record-setting quarter for Freemelt with revenues from the first eMelt delivery, coupled with three Freemelt ONE printers and several ongoing application projects. However, we have to save the famous words for another quarter, as it seems two printer deliveries have been postponed to H2 and, therefore, also revenues related to the printers. The postponement is not dramatic and not the first, nor likely the last, as estimating precise delivery dates is challenging for the company.
Disclosures and disclaimers