Redeye provides an update following Heliospectra’s Q2’23 report. We find the margin improvements, combined with a stronger-than-expected top line, to be encouraging. However, order intake fell short of our expectations, implying a weaker Dutch market and a mixed outlook in the near term. We have made a few minor changes to our near-term estimates. Our fair value range, however, remains unchanged, with a base case of SEK1.9 per share.

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Heliospectra

* Less than 50% of existing revenues are recurring, potentially impacting business stability and predictability.
* Generates no profits and negative cash flow, which may lead to dilution of shareholder value through fundraising.
* Earnings affected by commodity prices, particularly electricity costs, which impact customers in the horticultural industry.
* Limited cyclical or capital markets independence, potentially exposing the company to economic fluctuations.

* Strong market position in Agtech segment with significant growth potential in greenhouses and vertical farming.
* Asset-light business model allowing for scalable growth without expensive reinvestment.
* Successful expansion into new geographic markets, demonstrating adaptability and growth potential.
* Benefiting from secular tailwinds in sustainable agriculture and advanced lighting technologies.
* Products designed for longevity, lasting over a decade and offering sustained value to customers.

* Heliospectra's operating margin is below the desired thresholds, suggesting potential profitability challenges.
* Revenue and earnings growth have been inconsistent and below industry averages, potentially signalling competitive pressures or market saturation.
* The company’s financial health indicators, such as current ratio and debt management metrics, fall short of recommended levels, raising concerns about liquidity and financial stability.
* Heliospectra does not demonstrate strong dividend performance or growth, which may be less attractive to income-focused investors.

* Operating Margin (EBIT) has increased for three consecutive years, indicating improved cost management and operational efficiency.
* The company has maintained low one-time charges to sales, averaging less than 3% over the past five years, demonstrating financial transparency.

* Limited gender diversity on the board, with less than one-third of seats held by women, potentially impacting decision-making and talent retention.
* Lack of significant insider ownership, with management owning less than 5% of equity, which may affect alignment with shareholder interests.
* Unclear track record of consistently delivering on promises and generating attractive returns on capital investments.
* Limited founder involvement in the business, which could impact the preservation of original vision and entrepreneurial spirit.

* Strong CEO leadership with deep industry knowledge and a clear strategic vision for long-term value creation and profitability.
* Lean, decentralized organization promoting accountability and innovation, with a focus on customer needs and adaptability.
* Commitment to innovation demonstrated through continuous product development and strategic partnerships in the horticulture industry.
* Presence of controlling owners with long-term commitment, aligning management interests with shareholders and fostering stability.

SEKm	2021	2022	2023e	2024e
Total Revenue	35.2	25.7	41.7	100.0
Revenue Growth	-8.9%	-26.9%	62.1%	140%
EBITDA	-39.1	-32.0	-17.8	-1.5
EBIT	-60.2	-36.0	-21.1	-5.5
EBIT Margin	-171%	-140%	-50.6%	-5.5%
Net Income	-60.2	-36.1	-21.1	-5.5
EV/Revenue	2.4	4.5	2.6	1.2

Solid sales and margin improvements

Soft order intake

Minor estimate adjustments - Intact fair value range

Key financials

Investment thesis