Redeye has revised its forecast following TH1NG’s Q3 2024 report, where sales declined y/y due to the divestment of the broadband business but saw strong IoT growth and a gross margin boost to 82%. The founder, Klas Westholm, stepped down as CEO, with Tomas Karlsson (former chairman) appointed interim CEO, signalling tighter control by major shareholder Skellefteå Kraft. Despite lowering Q4 2024  estimates, our valuation remains intact with a Base Case at SEK2.2 per share.

TH1NG

* TH1NG currently generates no profits and negative cash flow, which may pose financial challenges and increase reliance on external funding.
* The IoT market remains fragmented, with no single player dominating entirely, potentially limiting TH1NG's ability to capture significant market share.
* The company's revenue base is not well-diversified, with an estimated 60% of revenues coming from Sweden, increasing vulnerability to regional economic fluctuations.
* TH1NG is still dependent on access to capital markets to raise cash, making it indirectly dependent on the overall economy for business growth.

* TH1NG's business model is designed for efficient scaling, leveraging its IoT platform without significant reinvestment, allowing for cost-effective market expansion.
* The company is well-positioned to benefit from secular tailwinds driving IoT adoption and digital transformation, capitalizing on long-term growth trends.
* TH1NG's offerings focus on durable and scalable IoT solutions, designed to remain adaptable and relevant for many years, supporting long-term customer needs.
* The company benefits from high switching costs due to integrated IoT solutions and strong relationships with municipalities, creating long-term partnerships and customer loyalty.
* TH1NG's products contribute to the greater good by enabling smart, sustainable urban solutions, improving efficiency, enhancing safety, and reducing environmental impact.

* Operating margin below 20% and not showing consistent growth, indicating potential efficiency or competitive issues.
* Poor historical growth metrics, including below-average revenue growth and inconsistent earnings growth.
* Weak financial health indicators, such as high net debt relative to operating and free cash flow.
* Lack of consistent dividend growth or attractive yield, limiting appeal for income-focused investors.

* Strong gross profit margin exceeding 40%, indicating profitable product mix and pricing power.
* Current assets 1.5 times greater than current liabilities, demonstrating robust short-term liquidity.
* Low occurrence of one-time charges relative to sales, suggesting financial transparency and consistent reporting.

* Short tenure of senior management team and CEO, potentially impacting stability and long-term strategy execution.
* Lack of founder involvement in the business, which could affect corporate culture and long-term vision.
* Insufficient management ownership stake (less than 5% collectively), potentially misaligning interests with shareholders.
* Absence of sustainability-related performance metrics in executive compensation plans, overlooking important ESG considerations.
* Increasing share count without corresponding EPS growth, potentially signaling financial challenges or dilution of shareholder value.

* Strong leadership with a clear long-term strategy and deep industry expertise, demonstrated by the interim CEO's extensive experience in related sectors.
* Lean organizational structure promoting self-direction and accountability, fostering innovation and adaptability.
* Well-defined strategic plan focused on creating long-term value, positioning TH1NG as a leading IoT operator.
* Transparent and consistent investor communication, emphasizing long-term business goals and providing clear metrics.
* Balanced board composition with 50% female representation, indicating a commitment to diversity in leadership.


SEKm	2022	2023	2024e	2025e	2026e
Total Revenue	40.8	27.6	30.9	36.7	52.5
Revenue Growth	-41.9%	-32.3%	11.8%	18.8%	42.9%
EBITDA	2.2	-13.2	-2.1	-1.8	3.9
EBIT	-2.9	-19.5	-8.1	-3.2	2.4
EBIT Margin	-16.6%	-86.9%	-41.9%	-9.3%	4.8%
Net Income	-16.4	-20.0	-8.6	-3.1	2.5
EV/Sales	0.8	1.1	3.2	1.6	1.1
EV/EBIT	-4.8	-1.3	-7.7	-17.1	22.6

Q3 2024: Sales in line, Solid gross margin

The main owner consolidates control

Intact valuation

Key financials