Napatech: Dell UPF design opens large new market - ABG

Q4 not likely to be a game-changer
New design win with Dell opens large new segment
Ambition of 50-60k units implies P/E of 3.9-2.2x


Q4 not likely to be very exciting

We forecast Q4 revenue of DKK 36m, which is an increase of 6% from DKK 34m in Q3. Q4 revenue tends to be 16-18% above Q3, which means that there could be some upside to this estimate if normal seasonality holds. We expect the F5 contract to slowly begin to ramp up in Q4/Q1, which could also represent upside to our Q4 estimate. We estimate a gross margin of 70% and cash opex of DKK 47m, which gives an EBITDAC of DKK -22m. We expect Napatech's legacy business to continue to improve in H1'25 as its largest customer NetScout depletes its inventory and returns to a more normalised buying pattern. At the same time, we expect a stable cost base, which in combination with the start-up of the F5 contract and some non-recurring engineering costs (NRE) should contribute to reduced cash burn. We make no changes to our estimates in this report.

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