Gapwaves carried over its momentum from Q1 into the Q2 report, beating Redeye's estimates and consensus. Gapwaves entered start of production (SOP) with Smartmicro, following Hella in Q1. Redeye expects these to successively ramping-up during 2024e-2025e. Redeye raise its estimates for H2 but retain its fair value range. Redeye sees several catalysts for H2 2024.

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Gapwaves

* Currently generates no profits and negative cash flow, which may dilute shareholder value through discounted fundraising.
* Lack of geographic market expansion success limits growth potential and demonstrates potential challenges in adapting the business model to new locations.
* Heavy reliance on a single revenue stream, with two other minimal streams expected to remain small, indicating a lack of revenue diversification.
* Negative return on invested capital (ROIC) suggests challenges in creating value and maintaining a competitive moat.
* Dependence on key individuals for success poses risks to long-term stability and growth.

* Strong recurring revenue model enhances business stability and predictability, making scaling easier and attracting higher investor valuations.
* Benefits from secular tailwinds in the wireless technology industry, with double-digit topline growth in an immature market.
* Operates in an oligopolistic market with few dominant players, leading to more predictable business outcomes and higher profit margins.
* Possesses sustainable competitive advantages that are expected to last for decades, indicating long-term value and potential for outperformance.
* Products contribute to the greater good by enhancing automotive safety through technology, aligning with increasing investor focus on ethical practices.

* Operating margin below 20% and not increasing consistently, suggesting potential efficiency or competitive challenges.
* Weak historical earnings growth, failing to consistently exceed 10% annually or outperform the five-year average.
* Likely need to raise capital in the next 12 months, indicating potential financial pressure and risk of shareholder dilution.
* Declining or lacking cash flow cover for dividends, raising concerns about dividend sustainability and financial health.
* Poor inventory and accounts receivable management, with ratios exceeding 20% and their 5-year averages, potentially signaling inefficiencies.

* Strong gross profit margin exceeding 40%, indicating pricing power and potential for accelerated profits with sales growth.
* Solid liquidity position with current assets 1.5 times greater than current liabilities, demonstrating robust short-term financial stability.
* Effective debt management with net debt less than two times operating cash flow, suggesting good financial health.
* High operating cash flow and free cash flow conversion rates (above 80%) over the past five years, indicating strong ability to generate real cash profits.

* Lack of a lean organization, with G&A expenses exceeding gross profits, suggesting potential inefficiencies in the company structure.
* Decreasing R&D spending over recent years indicates a potential lack of commitment to innovation, which could hinder long-term competitiveness.
* Absence of dividend history and share buybacks suggests limited focus on returning value to shareholders through traditional means.
* Increasing share count without corresponding EPS growth signals poor performance of capital raised through share issues.
* Lack of female representation in management and limited board diversity may hinder diverse perspectives and decision-making processes.

* Strong executive team stability with CEO and senior management tenure exceeding five years, indicating consistent leadership and strategic continuity.
* Management demonstrates consistent delivery on promises and has a well-defined strategic plan expected to create value.
* The company maintains clear, timely, and consistent business updates, focusing on long-term value creation in its communication with investors.
* Evenly distributed executive compensation and reasonable CEO perks suggest balanced leadership and fair compensation practices.
* Presence of a controlling owner (Kildal Antenn AB) with long-term commitment, owning over 50% of voting rights, indicates strong alignment with shareholders' interests.

SEKm	2022	2023	2024e	2025e	2026e
Revenues	70.9	33.7	55.1	68.2	115.5
Revenue Growth	77.7%	-52.4%	63.3%	23.7%	69.4%
EBITDA	-14.8	-62.8	-45.8	-51.1	-29.1
EBIT	-22.8	-71.3	-53.6	-58.4	-35.9
EBIT Margin	-35.6%	-259%	-106%	-92.1%	-32.6%
Net Income	-18.0	-69.2	-52.5	-58.4	-35.9
EV/Sales	10.5	16.5	8.0	7.3	4.5
EV/EBIT	-29.4	-6.4	-7.5	-7.9	-13.9

Strong report

Close to ramping revenues following SOP of Hella and Smartmicro

Several catalysts on the horizon

Key financials

Outcome vs estimates