Netmore Group Q2 2023: Review

Research Update

2023-08-28

06:00

Redeye provides an update following Netmore’s Q2 2023 report, highlighting the company’s record-breaking sensor growth, geographical expansion and a solid 84% sales growth driven by infrastructure rollout in the UK. Considering these developments, it is apparent that Netmore is well-positioned to capitalize on extensive projects within the expanding Internet of Things (IoT) universe. While minor adjustments to our forecast have been made, we are maintaining our fair value range and base case.

Alexander Flening

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Netmore Group Q2 2023 - Financial review

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Stellar sales growth

Netmore achieved net sales of SEK20m, showcasing an impressive 84% y/y growth and a 23% q/q expansion. This performance exceeded our initial projections, which had anticipated sales of SEK18.2m. Once again, the standout contributors to this solid figure were the IoT Networks and Property Network segments. Particularly noteworthy is the IoT Network segment, which played a substantial role in driving growth. Revenues for this segment reached SEK10.4m for the quarter, marking an exceptional 825% y/y and 71% q/q growth.

Well-positioned in a growing market

Netmore is actively executing its growth-oriented strategic agenda in Europe. With the inclusion of Portugal, Austria, and Norway, the company’s operations now span 11 geographical markets. Additionally, the company expands its market standing through three new commercial deals and strategic collaborations with prominent industry players. A significant achievement is Netmore’s record-breaking sensor growth, showcasing an impressive increase of 85% q/q and 251% y/y. This is reflected in a substantial 107% growth in Monthly Recurring Revenue (MRR) for the IoT Networks segment. Considering these developments, it is apparent that Netmore is well-positioned to capitalize on extensive projects within the expanding Internet of Things (IoT) universe.

Maintained valuation

Following Netmore’s Q2 2023 report, we have made minor forecast adjustments. However, these adjustments’ overall influence on our valuation is negligible. Consequently, we are maintaining our fair value range and base case. Our fair value range is SEK0.8–4.8, and our base case is SEK2.3. The fair value range is wide, owing to the unpredictable nature of Netmore’s long-term growth and profitability; this depends on the product mix and international expansion plans. We forecast long-term gross margins above 60% and a terminal EBIT margin of >20%. Sales growth and signs of near-term scalability are key metrics, so we will keep a sharp eye on margins and adjust these going forward.

Key financials

SEKm2020202120222023e2024e
Total Revenue32.142.850.780.6158.2
Revenue Growth153%33.5%18.3%59.1%96.2%
EBITDA-42.6-49.9-48.9-44.917.0
EBIT-57.3-67.1-65.5-57.83.1
EBIT Margin-179%-157%-129%-71.6%2.0%
Net Income-60.3-70.6-66.7-53.613.0
EV/Revenue6.79.86.64.62.1
EV/EBIT-3.7-6.2-5.1-6.4109

Netmore Group Q2 2023 - Financial review

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Netmore Group Q2 2023 - Financial review

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