Napatech lowered its 2021 revenue guidance by 12% on a midpoint basis to DKK 192-196m (DKK 210-230m previously). The updated guidance reflects indirect supply chain issues causing postponements in Q4 deliveries (mainly due to delayed server deliveries among end-user customers). However, it is also a reflection of the expected USD 1-2m pilot order from the Lenovo deal that has not yet materialised. The company says that underlying demand remains strong, which is also reflected in the 42% y-o-y increase in Q4 order intake. The company makes no changes to its cost guidance. For 2022, the company expects USD 37-41m in revenues, which corresponds to DKK 243-270m and to y-o-y growth of 27-38%.
Sales and EBITDA down 8-10% and 23-32% for ’21-‘22e
Following the indirect supply issues and the delay in the Virtualisation pilot order, we lower our Sales estimates for 2021 and 2022 to DKK 194m and DKK 247m, respectively. With strong underlying demand, we believe that Napatech should see strong growth when the component situation normalises. However, the supply issues remain uncertain and we consequently take a cautious approach going into 2022. Our updated estimates factor in limited contributions from potential Virtualisation orders as we now expect the first pilot order in late H2 ’22 and the ramp-up to materialise in 2023. Consequently, if the Virtualisation opportunity proves successful earlier in 2022, there should be an upside to our estimates. To capture this growth opportunity, Napatech is increasing its capex for 2022. We expect this to lead to a negative FCF until 2023e.
Peers point to share price of NOK 5-19
Hardware-enabled software companies trade at an EV/Gross Profit of 8.2x and 5.8x in ‘21e and ‘22e. Pricing Napatech in line with this peer group points to a share price of NOK 15-19. Profitable Nord
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