Carnegie Investment Bank
Midsummer
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2024-05-03 Revenues still low but good cost control Download | Show Close
Research | 3 May 2024 | Midsummer

Revenues still low but good cost control

 

Weak revenues, but good cost control bolsters results

Midsummer reported weak net sales, -31% Y/Y, partly owing to installation activities now being conducted by external players, unlike before when they were carried out internally. Sales of solar panels were also weak, -56% owing to the lukewarm private market, while the B2B market – which should become the chief sales channel – is generally seeing longer decision-making processes. The operations in Italy did not contribute to sales during the quarter either. The company’s measures to cut costs are having an increasingly positive effect on the results, and costs fell considerably more than sales, spurring a significant improvement of some SEK10m in EBITDA versus Q1(23). The sizeable grant from Invitalia of SEK90–100m is expected in June, and the company is solving its near-term financing requirements until payment with a loan from shareholders, among others.

Lower sales forecasts and grant income adjustments but with relatively limited effect on results

Given the lacklustre start to the year and the lower expectations for the scaling up of production in Italy, we slash our sales forecasts for 2024. The good cost control and now more balanced production upscaling in Italy means that our expectations are largely unchanged, however. We have also switched the grant income from items affecting comparability in the income statement to payments in cash flow for the large payout and have also shifted some R&D-related grant income from 2024e to 2025e.

 

Marginally unchanged fair value

We have adjusted our fair value marginally to SEK2.4–3.2 (2.5–3.3) after shifting the revenue base from 2024e to a weighted value with two-thirds of sales in 2024e and one-third in 2025e and increasing the number of shares following the latest directed issue. We still apply an EV/S multiple of 3x, based on sector multiples mainly from larger US photovoltaic companies. Although the risk remains high, Midsummer is closing in on the inflection point for lower risk, as production rises from today’s 1–2 MW a year to 52 MW when the Italian factory achieves full utilisation. The company has also taken an important step towards establishing the new, partly EU-financed mega-factory of 200 MW capacity by identifying a building in Flen for this. We have not included this factory in our forecasts, as the uncertainty regarding its counterparty financing remains elevated.

 

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