Redeye provides an update on Gasporox after its Q3 2023 report. The report came in weaker-than-expected after H1 2023 results exceeding our expectations significantly. While we are pleased by AutoMap already receiving orders worth SEK3m, we have less optimistic Gasporox will manage to grow in H1 2024 due to the strong 2023 results. Thus, we reduce our fair value range while we remain optimistic about the long-term.

Due diligence on CCIT market and the EU Annex 1

Gasporox

* Lack of recurring revenue model and limited geographic market expansion, potentially hindering predictable growth and scalability.
* Unable to consistently generate returns on invested capital exceeding the cost of capital, suggesting possible challenges in maintaining a competitive moat.
* Narrow revenue base with limited diversification, increasing vulnerability to market fluctuations and customer concentration risks.
* Dependence on key individuals for success, posing potential operational risks if these individuals were to leave the company.
* Uncertainty regarding the longevity of competitive advantages and pricing power, which could impact long-term profitability and market position.

* Strong potential for meaningful reinvestment opportunities and ability to scale without expensive reinvestment, indicating efficient growth capabilities.
* Benefits from secular tailwinds supporting growth, with core business unlikely to be disrupted, suggesting long-term stability and resilience.
* Easily identifiable sustainable competitive advantages, potentially providing a strong market position and value capture ability.
* Proactively promotes environmental sustainability and contributes to the greater good, aligning with growing investor focus on ethical practices.
* Demonstrates positive employee satisfaction and customer-supplier relationships, fostering long-term sustainability and stakeholder value creation.

* Operating margin (EBIT) below 20%, suggesting potential competitive pressures or cost management challenges
* Return on Equity (ROE) below 20% for the last five years, indicating suboptimal utilization of shareholder capital
* Inconsistent earnings growth, failing to maintain 10%+ growth over five years or match historical averages
* Likely need to raise capital in the next 12 months, potentially leading to shareholder dilution
* Weak dividend performance, lacking consistent growth or coverage by cash flows, which may concern income-focused investors

* Strong gross profit margin exceeding 40%, indicating profitable product mix and pricing power
* Consistently increasing operating margin (EBIT) over three consecutive years, suggesting improved cost management and operational efficiency
* Healthy debt management with Net Debt less than two times Operating Cash Flow and five times Free Cash Flow
* Efficient inventory and accounts receivable management, both below 20% of sales and their 5-year averages
* High Operating Cash Flow and Free Cash Flow conversion rates above 80% over the past five years, indicating strong cash generation abilities

* Potential dilution of shareholder value due to increasing share count without corresponding EPS growth.
* Weak commitment to sustainability reporting, which may indicate gaps in ESG practices or disclosure.
* Lack of sustainability-related performance incentives in executive compensation plans.
* Management owns less than a significant stake in the business, potentially misaligning interests with shareholders.
* Unclear status of minority shareholder treatment, raising potential governance concerns.

* Strong founder mentality with a CEO who inspires long-term vision, challenges conventions, and possesses deep industry knowledge.
* Experienced management team with consistent delivery on promises and a history of value creation.
* Effective capital allocation, focusing on innovation and generating attractive returns on investments.
* Transparent and candid investor communication, emphasizing long-term business value and consistent messaging.
* Board leadership demonstrates strong governance with independent directors, gender diversity, and alignment with business strategy.

SEKm	2021	2022	2023e	2024e	2025e
Revenues	15.7	21.4	31.1	34.9	47.1
Revenue Growth	26.4%	36.3%	44.9%	12.3%	35.0%
EBITDA	-2.7	-0.90	5.2	7.1	10.0
EBIT	-5.4	-4.2	0.94	1.7	3.9
EBIT Margin	-34.2%	-19.7%	3.0%	4.9%	8.2%
Net Income	-5.4	-4.4	0.20	0.92	3.1
EV/Revenue	5.6	3.8	3.5	3.2	2.3
EV/EBIT	-16.3	-19.2	116	64.8	28.3

Below expectations while still EBITDA positive

Order for AutoMap secured

Revised fair value range

Key financials

Due diligence on CCIT market and the EU Annex 1