Heliospectra reported a y/y growth rate of 22%, resulting in net sales of SEK8.3m, falling short of our expectations of SEK11.6m. However, the gross margin of 44% exceeded our forecast by 8pp and was on par with the previous quarter. Operating expenses (OPEX) amounted to SEK8.6m, a decrease of approximately 28% year-over-year and below our estimated SEK9.2m. Heliospectra’s cost-reduction program, initiated last year, has consistently delivered favourable outcomes over the past six quarters, optimizing the company’s cost structure. With lower OPEX and a higher gross margin, the operating loss was lower than expected at SEK4.9m, compared to our estimate of SEK6.8m.

The company acknowledges that it will not achieve the 2023 objectives, which called for breakeven by the end of 2023—according to the CEO letter, inflation, elevated interest rates, decreased energy prices, and a delayed subsidy program in the Netherlands substantially impacted the horticulture lighting market. It resulted in a sharp decline of approximately 40-50% in the Dutch market compared to the previous year. Consequently, numerous commercial growers and Agtech companies postponed their investments to later in the year or even the following year, leading to fewer potential projects and increased competition in the market. On the bright side, it appears that the North American and Danish markets demonstrate more resilience compared to the Dutch market, particularly in the ornamental segments.

We have adjusted our estimates, primarily impacting ‘23e-25e, trimming sales and increasing gross margin. Due to rising interest rates, we have raised the risk-free rate from 2.5% to 3%, resulting in a WACC of 13.5% (13.0%). Our Base Case is now at SEK1.4 (1.9) per share due to a higher WACC and estimate adjustments. Our fair value range is adjusted to SEK0.5-SEK4 per share (previously: SEK0.5-SEK5). Heliospectra is trading at an EV/EBIT multiple of 8x based on our 2025e.