W5 reported solid Q3-numbers where revenue was in line with our expectations while profit was above our forecast owing to a strong gross margin and lower opex than estimated. The company also gave a positive outlook for the year-end while also highlighting short-term uncertainty due to continued supply chain challenges.

W5 continued to build its order book during Q3 2022 and at the end of the quarter it stood at SEK217m compared to SEK142m in Q3 2021. Order intake has also continued to be strong during Q4 2022 with announced orders of around SEK54m in December while the company commented in its Q3-report that it expects a continued strong order intake in 2023. Furthermore, the announced expansion into Finland creates additional growth potential over the coming years.

Overall, we continue to see strong growth potential for W5 in the coming years driven by expansion into new segments, products and markets coupled with support from growing defense budgets. While we have trimmed our revenue estimates for Q4 due to continued supply chain challenges, we also raise our 2023-24E forecasts slightly on the back of the positive outlook in the Q3-report coupled with the announced orders during Q4 2022. Although our estimates are increased for 2023-24E, our valuation range is slightly lowered as we have raised our risk-free rate assumptions and our new base case stands at SEK70 (SEK74).