In Q1, sales was low due to low System Sales - which will always be volatile. We had anticipated revenues from both Trafikverket in Sweden and the order from the Netherlands to turn into revenues already in Q1, which is the main reason for sales missing our estimates. At the same time, the qualitative TRaaS revenue continued its strong growth trajectory. Also, a temporarily heightened cost base caused poor profitability in Q1.

Sensys Gatso expects the Netherlands order to start generating revenue from Q3 (or Q4), and that the Trafikverket order will generate revenues from Q4. When these start generating revenues, the development projects for this, which currently causes a heightened cost base, will be over. We think this will bring a nice combination of lower costs and higher revenues, resulting in revenue growth and margin expansion.

Redeye makes downward adjustments for its 2023 estimates but raises estimates for 2024. We think the strong revenue growth and margin expansion from Q4 2023 to the end of 2024 will attract much investor interest. Hence, entering the shares ahead of this journey could be interesting. We guess the gap between the share price and our Base Case will close during this period. After lowering estimates and raising our WACC from 11.0% to 11.5%, we lower our fair value range. Our Base Case is SEK1.4 (1.6), Bear Case is SEK0.7 (0.9), and Bull Case is SEK2.1 (2.5).