Ovzon: Positive growth trend continues - ABG

Sales of SEK 78m (ABGSCe SEK 74m), up 135% y-o-y

‘22e sales up 4% on higher leased capacity sales

Ovzon-3 to be launched in Dec’22-Feb’22

Italian Fire Corporation contact is driving sales
Ovzon’s positive momentum continued in Q2. Sales grew 135% y-o-y to SEK 78m (+5% vs. ABGSCe), driven by recent contract wins, including the rollout of the Italian Fire Corporation contract signed on 31 December. Although Ovzon still has some unsold capacity, the gross margin of 31% benefited from the higher sales and came in above ABGSCe at 18%. EBIT improved to SEK -9m (ABGSCe SEK -25m), up from SEK -28m in Q1’21, while capex was SEK 51m. Furthermore, the Ovzon-3 project is now entering its final phase, as the manufacturer has now received components that were previously inaccessible due to supply chain disturbances. The satellite is expected to reach orbit in Dec’22-Feb’23, which is a slight delay from the previous guidance of Q4’22. We gather that visibility has improved significantly, however, so we are optimistic that this will occur within the new launch window.

We expect the current momentum to continue in H2
After a downturn in sales during 2020-21 (vs. historical levels), we believe that Ovzon has now reached a new, higher run-rate, which we expect to continue in H2. We see upside to our forecasts from further order announcements (particularly given the unsold capacity) while recent geopolitical events are driving increased demand for the company’s services (though lead times are long). Based on this, we lift our ‘22e sales by 4%. For ‘23-‘24, however, we cut our forecasts by 2% on reduced Ovzon-3 sales, as the company’s pre-capacity contract with Intelsat has been renegotiated down by ~15% due to the delay. To us, this sounds like a reasonable outcome, and is cause for no real concern.
Ovzon’s business model is scalable – 6x ‘24e EV/EBIT We expect 2024e sales of SEK 933m, of which Ovzon-3 accounts for SEK 667m, corresponding to 74% utilisation. On the back of the inherent scala ...
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