Xplora Technologies: A stock to watch - ABG

Leading provider of smartwatches for children
Geographic expansion to drive 32% CAGR in ’21-25e
Fair value range of NOK 14-28/share

~750k smartwatches sold and 124k mobile subscribers
Xplora is a leading provider of children’s smartwatches and has sold more than 750k watches since its inception in 2016. The watches enable parents to keep in contact their children and are restricted to only showing child-friendly content. In addition, Xplora also receives recurring subscription revenues from the sale of its own Mobile subscriptions and value-added software applications. In Q1’22 it had 124k mobile subscribers and recurring revenues was ~25% of its revenues. It has established a strong market position with 17% total market penetration in Norway and close to 6% for the Nordics overall.

We forecast 32% sales and a 65% EBITA CAGR until 2025e
In 2022, Xplora has signed several new distribution agreements, among others with EE in the UK and Wal-Mart/Target (online) in the US. It will also launch its mobile subscription in the US, UK and France during the year. We forecast this to contribute to a 32% sales CAGR from ’21 to ‘25e. For 2022, we forecast sales of NOK 554m, up 28% y-o-y, which leaves some upside to the company’s guidance of +50%. The reason for our cautious estimate is that we see a risk of reduced consumer electronics demand. From 2023e, however, we expect sales growth to accelerate again, driven by a significantly expanded distribution network. In the longer term, we expect Xplora to leverage its IoT platform to expand its product portfolio to new types of connected devices, markets which are expected to grow by 100-200% until 2026.

Initiating coverage with a fair value range of NOK 14-28
Xplora is currently trading at 1.0x ‘22e EV/sales and 2.2x gross profit. This is ~30% and ~60% below the median of our peer group, respectively. Our DCF gives a fair value range of NOK 20-28 per share. Based on this, we initiate coverage with a fair value range of NOK 14-28. In our v ...
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