Redeye endorses SenzaGen’s new grant from RIFM, valued at SEK3.0m. We argue that the order should be considered large and highlight SenzaGen’s solid relationship with RIFM. Our sales estimates remain untouched, and we reiterate our base case.

SenzaGen

* Currently unprofitable with negative cash flow, relying on capital markets for funding and expansion.
* Limited geographic expansion success, still in early stages of establishing a strong global presence.
* Relatively concentrated revenue base, with dependency on specific products and markets.
* Operates in a highly regulated environment, potentially impacting business operations and growth.
* Faces potential competition in the evolving non-animal testing market, with uncertainty about long-term sustainability of competitive advantages.

* Strong recurring revenue base and scalable business model, with potential for five-fold growth in a decade through innovative non-animal testing solutions.
* Benefits from secular tailwinds in sustainable and ethical testing, particularly in cosmetics, pharmaceuticals, and medical devices industries.
* Clear competitive advantages with proprietary GARD platform, meeting growing regulatory demands for ethical testing alternatives.
* Successfully increased prices without customer churn, indicating strong value proposition and customer loyalty.
* Products contribute to greater good by promoting non-animal testing methods, aligning with ethical and sustainability trends.

* Underperforming stock price since IPO, failing to meet the 10% compounded growth target.
* Weak earnings growth, falling short of both historical averages and the 10% annual growth benchmark over the past five years.
* Poor Return on Equity (ROE) performance, failing to maintain a consistent 20% or higher rate over the last five years.
* Lack of dividend payments or growth, missing opportunities to attract income-focused investors and signal financial strength.

* Strong gross profit margin exceeding 40%, indicating profitable product mix and potential pricing power.
* Consistent increase in Operating Margin (EBIT) for three consecutive years, suggesting improved cost management and operational efficiency.
* Robust short-term liquidity with current assets 1.5 times greater than current liabilities, demonstrating strong financial health.
* Effective debt management with Net Debt less than two times Operating Cash Flow, indicating good repayment capacity.

* Limited insider ownership, with management and board members collectively owning less than the ideal 10% stake in the company.
* Lack of a controlling owner with long-term commitment, which could potentially impact strategic decision-making and long-term stability.
* CEO's tenure at SenzaGen is less than 10 years, potentially limiting deep institutional knowledge of the company's operations and culture.
* Uncertain information about executive compensation structures and incentives for sustainability-related performance, which could affect long-term alignment with shareholder interests.

* Strong leadership under CEO Peter Nählstedt, with a proven track record of success and a clear long-term vision focused on innovation and sustainable growth in non-animal testing solutions.
* Commitment to innovation demonstrated through the development of the GARD platform and strategic acquisitions, positioning SenzaGen at the forefront of industry advancements.
* Transparent and consistent communication with stakeholders, emphasizing long-term business value and providing timely updates on key developments and progress.
* Active involvement of founder Carl Borrebaeck as chairman, bringing continuity and vision to the company's strategic direction.
* Diverse and experienced board of directors with relevant industry expertise, promoting female representation in leadership and aligning well with the company's business strategy.