Net sales in the quarter were SEK3.4m, against our estimate of SEK24.0m, corresponding to a c86% miss. Last quarter, sales amounting to SEK19m were announced through orders beforehand. This quarter, no orders have been announced in advance, meaning that the entire reported sales are from smaller, unannounced orders. This unannounced part was mostly in line with our estimates and the levels seen historically. We continue to reiterate that our estimates for specific quarters are guaranteed to be wrong, given that individual orders still have the potential to determine the outcome of individual quarters or even years.

Serstech carried out a two-week military exercise with the US Chemical and Biological Threat teams during the quarter, and was then invited to a follow-up evaluation event after the initial success. We think such positive feedback from a high-profile customers is very positive and although the evaluations are often thorough, contracts with US military can be expected to generate significant revenues over long periods if secured. The company also upgraded its substance library in the quarter, bringing the total number of identifiable substances to 24,000. As a result, Serstech now has one of the largest substance libraries in the industry.

Following the report, we make a downward adjustment for 2024e and expect SEK17m in sales for the fourth quarter (previously SEK26m) and SEK56m for the full year. This is in line with management’s commentary of not anticipating growth for the full year of 2024. We mostly keep the ramp-up base intact for the medium term, but given that growth is now starting at lower levels, this also influences sales for the remainder of the forecasting period. We expect sales of cSEK90m to materialise during 2025e. Our fair value range is SEK0.5(0.7)-SEK4.2(4.4), with a Base Case of SEK1.7(2.2) per share. The stock is currently trading at an EV/EBIT of 13.8x and 5.7x for 2025e and 2026e.