Net Insight is an established, global provider of network broadcasting equipment to broadcasters and production companies. Given its strong position in media transmission equipment, Net Insight has previously appeared well positioned to generate strong growth and high profitability. Unfortunately, these hopes have too often been dashed and the company has not been a priority for investors as of late. However, under the radar, management recently introduced a new, more focused strategy and in 2021–23 the company grew sales by double digits annually and improved profitability. Positioned to leverage on structural growth drivers even as it builds a new position in an adjacent area, the turnaround looks set to continue for the coming years, in our view.
Increased capacity and IP/cloud demand bode well for new strategy
In 2020 Net Insight decided to streamline itself and focus only on the faster growing part of the media feed transmission market, IP/Cloud-based solutions. From a position as a reliable, premium provider of network equipment that transports media streams from key events, such as the Olympics and other live events, Net Insight has outgrown its competition and strengthened its position. On top of riding the IP/Cloud trends, demand for increased capacity is a strong incentive for customers to upgrade software solutions on the already installed base.
A cost-efficient and regulator friendly 5G time synchronisation solution
5G technology has increased the need for time synchronisation in mobile networks. Net Insight is one of the most cost-optimal solutions for certain mobile operators, in our view. Having already sold a handful of projects, a strong pipeline and an orderbook of roughly SEK200m, we see the new time synchronisation business unit making a meaningful contribution to growth ahead. Regulatory tailwinds are a possibility too.
We expect financial targets to be met and see a fair value range of SEK6–9
The company aims for 15% sales CAGR(23–27) and 20% EBIT margin by 2027. Given its market position and structural growth drivers, we see this as achievable. Comparing Net Insight to a broad group of Swedish IT companies and applying a 25% discount we estimate a fair value range of SEK6–9/share. By delivering on the financial targets, we argue the shares should trade in the upper range as well as seeing regained confidence to narrow the 25% discount we apply
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