Xplora Technologies: Growth to accelerate in H2 - ABG

Good Q2 report, we raise our ’22-‘23e EBITDA

New product launches to drive higher growth in H2

~0.9x ‘22e EV/Sales, fair value range of NOK 14-28

Good Q2 report driven by a strong gross margin
Xplora reported a solid Q2 report with revenues of NOK 110m, +19% y-o-y. It sold 89k watches, 5% above our estimate of 85k. The ASP was also better at ~NOK 840/watch vs. our estimate of NOK 790. The number of subscribers ended the quarter at 134k, which was an increase of 42% y-o-y. Gross profit was NOK 60m, 21% above our estimate driven by higher sales and a strong gross margin (54% vs. our estimate of 48%). This led to EBITDA of NOK 0.5m vs. our NOK -6m. We raise our ’22-‘24e revenues by ~1%. Due to operating leverage, this lifts EBITDA by NOK 5m p.a.

New product launches to drive higher growth in H2
In H2, Xplora is launching the next generation of its products: XGO3, X6 and X6 Pro. This is important, as new product launches tend to be key growth drivers. X6 and X6 Pro have been slightly delayed, but as long as they are released ahead of Black Friday/Christmas shopping, they should still contribute well to H2 growth. Xplora has also signed multiple new distribution deals, such as with EE (the UK’s largest telco) and Wal-Mart, Target and Best Buy for online sale in the US. However, it usually takes some time to build consumer awareness in new markets and we expect the most impact from these new agreements from 2023e onwards. In H2, Xplora will launch its mobile subscription in the US, UK (already live), Germany and France. We forecast 2022e sales of NOK 559m, corresponding to 30% growth y-o-y. This is below company guidance of +50%, as we are cautious on the H2 outlook for consumer electronics on softer consumer sentiment.

Fair value range of NOK 14-28
Xplora is currently trading at 0.9x ‘22e EV/sales (~55% below peers). The company achieved a 109% sales CAGR from ’19-‘22e, and we expect it to grow at a 33% CAGR from ’22e to ‘25e. Our DCF gives a fair value range of NOK 19-27/share. ...
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