Ngenic reported record-high net sales in Q4 2023 of SEK23.0m (SEK8.3m), which included a non-result-affecting revenue of SEK4.9m. Even without this one-time revenue, the SEK18.1m net sales was the highest ever in a single quarter for Ngenic, which clearly beat our estimate of SEK14.1m. The gross margin (adjusted for the one-offs) amounted to 57% (45%), which is also a very solid figure and largely in line with our estimate of 59%. We believe this margin could persist going forward, as high-margin recurring revenues have good grounds for growing at a double-digit pace going forward, increasing its share of total sales. Despite the sales beat, EBITDA amounted to SEK-2.9m (SEK-7.5m) and fell short relative to our estimate of SEK1.5m on the back of higher OPEX than we expected.

The high sales figure was primarily driven by Ngenic Tune (B2C). However, recurring revenue managed to grow 24% in the quarter, which is primarily driven by Tune Highrise (B2B), where we see very solid market fundamentals for the segment going forward on the back of district heating prices seeing record high price increases, which has caused much despair among customers. We argue that this market development is very positive for Ngenic’s offering and will support recurring revenue growth going forward.

Following the extreme growth in 2022 and 2023, Ngenic has increased its focus on efficiency and profitability. We understand the organization is more streamlined now and that many internal processes have been improved, which should leave a mark on the P&L and cash flow going forward. On the back of this, we have reduced our cost assumptions somewhat, and we believe that Ngenic will reach positive EBITDA in H2 2024. Our fair value range is slightly reduced to SEK8(10)- SEK40(41) with a base case of SEK18(19) per share on the back of us updating our assumptions for a potential capital raise.