Andreas Eriksson | 2022-05-18 10:30
Strong sales highlight the first quarterThe report for Q1 2022 showed sales of MSEK 6.1, well above the MSEK 4.7 in Q1 2021, and just in line with our estimates of MSEK 6. This could be seen as a signal that Motion Display’s market is slowly returning to more solid ground. But we also note that order intake slowed down during the quarter. With MSEK 1.5 in order intake and an order book amounting to MSEK 2.7 at the end of Q1, we expect a deceleration in Q2. Although Motion Display has historically shown that big orders can turn the picture around quickly and unexpectedly, lead times are around three months to delivery, and with the company’s expansion into new sectors of the US bar & restaurant market in mind, we keep our sales estimate of MSEK 24 for the full year.
Strained liquidity but no cause for panicCash amounted to MSEK 1.5 at the end of Q1, however, we believe that the strained liquidity situation is a consequence of the strategic choice to secure components as the global supply chains has gotten increasingly worse, which forced sector colleague Pricer to issue a profit warning earlier this spring. As Motion Display’s inventory of components now amount to MSEK 7.4, we believe they are well prepared to handle inflow of orders in coming months. Combined with the cost control that was implemented during H2’21, we don’t expect any additional fundraising in the near future.
Attractive long term entry levels but with elevated riskAs the stock price has stagnated at levels around 1 SEK, we believe it offers an attractive entry level for the investor with some patience. Considering the impressive track record of the company’s products, it’s likely that Motion Display will be able to fight their way into becoming a big and recurring item in their existing customers’ marketing budgets. While only a small drop in the ocean for big giants like PepsiCo or Unilever, this would elevate Motion Display to the next level. The share price right now corresponds to an EV/Sales multiple of 0,8x 2022E whereas comparable peers trades at a range of 1.4-2.0x Sales. Based on a conservative WACC of 30% and target multiples of 1.4x Sales 2024 and 10x EBITDA 2024 we continue to see support for a fair value range of SEK 2.8-3.3 per share, i.e. well above today’s levels, in 12-24 months.
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