The Q4 2023 report sales and order intake figures were slightly softer than expected. OPEX was in line with our SEK9.2 forecast. However, a large charge of SEK4.1m resulting from discontinuing the MITRA Classic production line at the company’s Swedish partner and the write-off of stock and components impacted OPEX. The lower-than-expected gross margin led to a higher operating loss (EBIT) of SEK7.6m compared to our estimated loss of SEK3.8m.

Heliospectra reported a flat year-on-year growth rate, resulting in net sales of SEK9.9m, which fell below our expectations of SEK12.2m. The gross margin of 28% is 16pp below our forecast of 44%. Despite severe market challenges in 2023, net sales experienced a robust 37% year-over-year growth. Although the report did not disclose the product mix between Agtech and the greenhouse segment, the company stated it was a stable mix. Looking ahead to 2024, Heliospectra anticipates a significant shift towards the greenhouse segment as it fills the pipeline with larger greenhouse projects.

The order intake of SEK9.4m is 15% below our forecast of SEK11m. However, we believe Heliospectra has substantial pending contracts outside the Dutch market that might convert into confirmed orders in H1 2024

OPEX amounted to SEK9.0m, a decrease of c45% y/y and on par with our estimate. Heliospectra launched a cost-reduction program last year, consistently delivering favourable outcomes over the past six quarters, significantly optimising the company’s cost structure. In Q1 2024, Heliospectra concluded the final phase of the cost-cutting program by relocating the office in Gothenburg, resulting in a 50% reduction in rent costs. Due to the negative gross margin, the operating loss (EBIT) was higher than expected at SEK7.6 vs our -SEK3.8m estimate.
Operating cash flow for FY 2023 was -SEK25.1m; by the end of the quarter, cash and cash equivalents amounted to cSEK8.6m. In November 2023, Heliospectra announced a secured bridge loan of SEK10m from the main owners Weland Stål AB, Agartha AB, and Corespring New Technology AB. According to the company, the bridge loan enables the company to accelerate the commercial plan for 2024 and drive growth in strategic markets.

The Dutch market presented challenges for Heliospectra during 2023, with factors such as the absence of reference projects, a postponed subsidy program, and a market decline of 40-50% this year creating significant headwinds. Nevertheless, the subsidy program in the Netherlands is now open for applications, but growers have up to two years after approval to reimburse the 20% discount on energy-saving investments. As a result, we do not anticipate seeing any effects from the program until mid-2024, when growers typically place their orders.
Research and development efforts remain robust, with multiple product and platform enhancements in the pipeline. HelioCORE 2.0 was released commercially in Q4 2023. New features include the implementation of real weather forecasts in the DLI controller, a new graphical interface of the installation with a drag-and-drop feature for creating zones, and an improved data overview of the environment. During Q4, the development team advanced the next-generation ELIXIA and DYNA products, incorporating additional functionality set to launch in April/May 2024.
Heliospectra expanded its industry network in 2023, allowing it to pursue larger projects and bolster the pipeline for 2024. As a result, Heliospectra anticipates a shift in its portfolio towards larger commercial greenhouses in 2024. Due to the softer-than-expected order intake in Q4 2023 and seasonal effects, we foresee a softer first half followed by a stronger second half in 2024.

Our forecast still implies that Heliospectra will reach breakeven in 2025. Considering the seasonality of the business, with a weaker H1 followed by a substantially stronger H2, we expect to see quarterly breakeven results prior to 2025. Nevertheless, we estimate Heliospectra will achieve full-year breakeven in 2025. Following the Q4 2023 report, we have adjusted our estimates, primarily impacting  H1 2024e by trimming our sales estimates and lowering the cost base.

Our adjustments leave our Base and bear case intact at SEK1.4 and SEK0.4 per share, respectively, while the Bull case comes down by 10%. Our fair value range is adjusted to SEK0.4-SEK3.6 per share (previously: SEK0.4-SEK4.0). Heliospectra is trading at an EV/EBIT multiple of 8x based on our 2025e. Currently, Heliospectra is trading at an EV/Revenue multiple of 1x based on our 2024e. Our Base case valuation is based on the long-term assumptions in the table below.