The report showed a slightly weaker net sales and profitability than expected but a significant uptick in order intake. We interpret the Q1 2024 report as a transitional quarter, anticipating stronger quarters ahead in 2024 due to the robust order intake during the quarter and the positive outlook. The cost base was slightly higher than expected due to the office relocation during the quarter. However, we expect a reduction in costs following the completion of the move to a cheaper office. The cash position at the end of the quarter (SEK4.8m) and a negative working capital of approximately SEK6m raises concerns. However, the report indicates that “with the increased order intake and our payment terms of 80-100% in advance, we will see a positive cash flow in coming period”.

Heliospectra reported a y/y growth rate of 2%, resulting in net sales of SEK7.2m, which fell below our expectations of SEK8.4m, representing a -15% deviation. The gross margin of 40% was 3pp below our forecast of 43%. Although the report did not disclose the product mix between Agtech and the greenhouse segment, given the gross margin of 40%, we anticipated that a significant portion of the sales came from the Agtech segment, which typically holds a higher gross margin than the greenhouse segment.

Order intake was exceptionally strong at SEK27m (almost the same amount as the total order intake during 2023), c70% above our forecast of SEK16m. A substantial contributing factor to the increased order intake is a positive trend with larger orders from the Canadian market. During the quarter, Heliospectra announced two larger orders from Canadian customers, totalling SEK15.5m. The delivery of these orders is spread out through H2 2024 and 2025. The report indicates that larger order values from the Agtech segment further enhanced the order book intake during the quarter.

OPEX amounted to SEK9.4m, flat y/y and above our SEK7.8m estimate. The cost base was slightly higher than expected due to the office relocation during the quarter. We anticipate a reduction in costs following the completion of the move to a cheaper office. However, the new office in the Netherlands and new sales staff might offset the cost savings in our view. Due to a somewhat lower topline and higher OPEX than forecasted, the operating loss (EBIT) was higher than expected at SEK6.6 vs our -SEK4m estimate.

Operating cash flow for the quarter was -SEK3.5m; by the end of the quarter, cash and cash equivalents amounted to cSEK4.7m. 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. The cash position at the quarter's end and a negative working capital of approximately SEK6m raise concerns. However, the report indicates that “With the increased order intake, and our 80-100 percent prepayment conditions, we will see a positive cash flow in coming period”.
It is worth highlighting that the board of Heliospectra has chosen to create a control balance sheet for the company, subject to review by the company's auditor. We await the outcome, but we find it very likely that the main owners will continue to support Heliospectra should a capital injection be needed.

Having dedicated 2023 to updating the product and service platform, we view 2024 as the commercialization year for Heliospectra. Several supporting indicators support this reasoning:

Conversely, electricity availability for growers presents a similar challenge in both the European and North American markets. Growers are grappling with either insufficient electricity supply or delays in grid connections, potentially prolonging investment decisions for new greenhouses.

Further, this quote from the Financial Comment section within the Q1 2024 report is worth noting: "With the positive trend, the board is evaluating complementary alternative financing possibilities for strategic investments." We presume this relates to potential partnerships which is probably a sound strategy for a small company like Heliospectra. We very much look forward to more info, as discussions unfold.

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 before 2025. Nevertheless, we estimate Heliospectra will achieve full-year breakeven in 2025. On the back of the Q1 2024 report, we have made minimal adjustments to our estimates, primarily impacting 2024e by increasing our sales estimates by 2% and our OPEX estimates by c13%. Our OPEX estimate now includes costs for the new office in the Netherlands and new sales staff. We have already factored in a strong H2 2024, and the solid order intake in Q1 2024 reinforces confidence in our estimates. 

On the back of the Q1 2024 report, we have made minimal adjustments to our estimates, primarily impacting 2024e by increasing our sales estimates by 2% and our OPEX estimates by c13%. Our adjustments leave our fair value range intact at SEK0.4-SEK3.6 per share, and our Bace case is SEK1.4. Heliospectra is currently trading at an EV/Sales multiple of 1x based on 2024e and EV/EBITDA 7.4x on 2025e, and we highlight a considerable upside potential in the share price. Our Base case valuation is based on the long-term assumptions in the table below.

Additionally, we foresee a high likelihood of the bridge loan, obtained in November 2023, being settled through a directed share issuance rather than a cash repayment. Consequently, our valuation includes the anticipated dilution.