Redeye concludes that Smart Eye's Q4 2024 report was even better than it looked at first sight. Adjusted for one-off items relating to changes in accounting principles, the Automotive Solutions business area showed a stellar organic growth of 42% y/y, beating our estimates by 12%. With license revenue growing by 200% y/y, Redeye sees that momentum has finally picked up again after a couple of slow quarters. With many procurements still waiting to be nominated, we expect a continued good news flow ahead.

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Smart Eye

* Currently unprofitable and cash flow negative, relying on capital markets for funding, which may pose risks in challenging market conditions.
* Automotive industry's cyclical nature and potential disruption from self-driving technologies could impact long-term competitive advantage.
* Limited ability to increase prices, suggesting potential pricing pressure from OEM customers.
* Uncertainty about the longevity of competitive advantage beyond the next decade, particularly with rapid technological changes in the automotive sector.

* Strong market position with significant growth potential, benefiting from regulatory tailwinds and expanding into new technologies like Interior Sensing.
* Asset-light business model with high scalability, allowing for growth without heavy reinvestment and potential for upselling to existing customers.
* Clear competitive advantages including economies of scale, strong OEM relationships, and first-mover advantage in a complex, high-barrier industry.
* Diversified revenue base across multiple OEMs and business units, reducing dependency on single customers or markets.
* Products contribute to societal good by improving road safety, aligning with sustainable progress through technology.

* Lack of consistent profitability, with operating margins, ROE, and ROA below desired thresholds or industry averages.
* Inconsistent earnings growth and stability over longer periods, potentially indicating vulnerability to market fluctuations.
* High goodwill-to-assets ratio compared to industry average, suggesting reliance on acquisitions and potential risk of future impairments.
* Absence of a consistent dividend history or growth, limiting appeal for income-focused investors.

* Strong gross profit margin and revenue growth, indicating a competitive product mix and potential for increased profitability.
* Solid financial health with current assets 1.5 times greater than current liabilities and manageable debt levels relative to cash flows.
* Efficient inventory and accounts receivable management, suggesting effective operational control and cash collection practices.
* Low occurrence of one-time charges, demonstrating financial transparency and consistent reporting practices.

* Management has struggled to deliver on promises consistently, particularly regarding the adoption rate of cars produced with DMS, leading to delays in expected revenue growth.
* The CEO's tendency to chase new trends before fully capitalizing on previous investments has led to concerns about capital allocation and unnecessary dilution for shareholders.
* The company lacks a clear CEO succession plan, potentially risking future leadership transitions and long-term strategic continuity.
* Smart Eye has faced challenges in managing its cost base, leading to liquidity issues and a necessary rights issue in 2022, negatively impacting shareholders.

* CEO Martin Krantz demonstrates strong industry knowledge, visionary leadership, and commitment to innovation, consistently anticipating market trends and maintaining Smart Eye's competitive edge.
* The company has a lean organization promoting self-direction and accountability, fostering innovation and adaptability within each operating unit.
* Management shows a strong commitment to innovation, with a clear strategic plan focused on scaling up DMS and achieving design wins in interior sensing.
* The company consistently communicates with investors, focusing on long-term business value and tying company success to its mission of saving lives in traffic.
* Significant insider ownership (12%) and founder involvement indicate strong alignment with shareholder interests and confidence in the company's future.

Key Financials
SEKm	2023	2024	2025e	2026e	2027e
Total Revenue	315.6	370.7	554.7	943.0	1,176.3
Revenue Growth	32.2%	17.4%	49.6%	70.0%	24.7%
EBITDA	-127.7	-76.3	124.3	416.0	586.7
EBIT	-282.9	-244.3	-51.7	256.0	426.7
EBIT Margin	-93.6%	-67.7%	-9.5%	27.4%	36.5%
Net Income	-75.6	-246.7	-59.6	258.7	430.7
EV/Sales	10.1	6.3	4.0	2.1	1.3
EV/EBIT	-10.8	-9.3	-42.4	7.7	3.6

Smart Eye: Deviation table
SEKm	Q4 2023	Q1 2024	Q2 2024	Q3 2024	Q4 2024a	Q4 2024e	dev. %	dev. abs
Net sales	91.3	86.1	89.6	79.0	100.3	95.0	6%	5.3
Sales growth y/y	65%	34%	30%	2%	10%	4%

Automotive	30.8	32.8	32.9	32.4	35.8	37.5	-5%	-1.7
Automotive growth y/y	120%	139%	65%	35%	16%	0%

Behavioral Research	60.5	53.3	56.7	46.6	64.4	57.5	12%	6.9
Behavioral Research growth y/y	46%	5%	16%	-13%	6%	0%

Gross profit	84.5	79.8	82.9	74.0	90.2	87.1	4%	3.1

Underlying OPEX*	135.1	126.5	130.9	117.4	129.2	129.9	-1%	-0.7

EBITDA - Adjusted	-22.3	-23.0	-23.2	-17.5	-2.7	-16.3	-83%	13.6
EBITDA margin	-30%	-27%	-26%	-22%	-3%	-17%

EBITDA-CAPEX - Adjusted	-51.7	-47.2	-48.4	-44.1	-31.2	-43.3	-28%	12.1
EBITDA-CAPEX margin	-57%	-55%	-54%	-56%	-31%	-46%
*OPEX-D&A+Capitalized R&D, adjusted for restructuring costs, Source: Redeye research (estimates), Smart Eye (historical data)

Automotive showing 200% license revenue growth

Behavioral Research making a comeback

Fair value range maintained

Follow-up on financial KPIs