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Invisio: Not a spectacular quarter, but LT looks solid - ABG

No announced orders in Q3, supply chain may disrupt
Pent-up demand for Invisio’s products likely in 2022e
Trading at a ~20% discount to peers despite higher growth

The global supply chain issues have very likely had an impact on sales in Q3 and will probably continue to influence sales in the short-term. Long-term demand for Invisio’s products, on the other hand, looks strong. Invisio’s products are a complement to communication radios for the same customers. Historically, customers order Invisio’s products a few quarters after the delivery of communication radios. Since we see an increased order intake for L3Harris and Thales (radio manufacturers) in the last three quarters, we believe there is a pent-up demand for Invisio’s communication systems. The company also states that the US army ordered 100 000 new Jeeps, which can result in new orders for Invisio’s vehicle-mounted Intercom system. On the other hand, we believe that the next six months will probably be affected by the global supply chain issues, which may in turn continue to affect Invisio's sales indirectly through the radio companies’ delivery delays. We visited the company in Copenhagen last week and left with the impression that the product portfolio has a good and complementary mix.

Based on our new estimates, Invisio is trading at an EV/EBIT of 41x-28x for ’22e-’23e, which is a discount of 20% vs peer median, although we expect a higher sales and EBIT CAGR in 2021-23e. In terms of the Q4’21e outlook, we expect the global reopening will enable important physical sales meetings, which will likely have a positive effect on Invisio’s chances of winning important new orders.
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