Carnegie Investment Bank
Sensys Gatso Group
Date Title Alternative
2024-04-29 Solid order intake in seasonally weak quarter on earnings front Download | Show Close
2024-02-23 Robust report with clear signs of scalability Download | Show Close
Research | 23 Feb 2024 | Sensys Gatso Group

Robust report with clear signs of scalability

 

Clear signs of scalability in solid report

Sensys Gatso reported a solid Q4(23). Revenues grew by 42%, driven by high systems sales, with a large Middle Eastern contract being delivered. EBIT developed healthily in the quarter, reaching a record-high for recent times following a weaker period. Systems sales typically bring lower gross margins, with this decreasing to 41.6% from 48.5% in Q4(22). In absolute terms, gross profits reached a record level, however. Sales growth for full-year 2023 was 26%, while operating expenses rose by 11.4%, offering increasing evidence of scalability. Revenues from TRaaS continued to grow, up 12% Y/Y in Q4(23) and accounting for 58% of total revenues for the full year. This is close to the company’s 60% target for 2025.

Estimates reduced owing to higher costs in 2024e

We adjust our forecasts for 2024 on account of higher costs for the company to fulfil its rapidly growing order book, but we leave our 2025 estimates largely unchanged. We expect continued solid revenue growth given the robust systems sales, particularly the large order intake from Trafikverket (Swedish Transport Administration) and the Netherlands. Given this, and the increased maintenance and operator service sales (in line with the historical development), we still expect the company to reach its target of SEK1bn in revenues and an EBITDA margin above 15% for 2025.

 

Unchanged valuation, with fair value of SEK80–100

We leave our valuation largely unchanged. We value Sensys Gatso using a DCF model, including WACC of 12%, a sustainable operating margin of 13%, and long-term growth of 3%. This suggests a DCF value of SEK90 per share. We believe the company will achieve its 2025 target and continue its growth thereafter. A greater share of revenues from software overall, and TRaaS in particular, would ensure higher margins in the long term than before. Our fair value increases to SEK80–100 per share (90–95).

 

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