INVISIO - Stable Q2e, market is recovering

ABGSC Q2’21e EBIT of SEK 15m Minor estimate changes on lower gross margin in Q2’21e Maintain DCF fair value range of SEK 125-305 per share We forecast ~23% total growth in Q2e, at SEK 152m sales We forecast a stable Q2’21 report from Invisio, with sales of SEK 152m, +23. 2% y-o-y (~1% organic), driven by gradually improving small order intake, the acquisition of Racal Acoustics and the recently announced order from an existing customer in the US Department of Defense of SEK 40m (we factor in ~50% of the order being delivered in Q2’21). We do not expect any gross margin-dilutive orders (through third parties) in Q2’21, but the inclusion of Racal Acoustics does have a small negative impact. We therefore forecast a gross margin of 57.

5%. In total this yields a Q2’21e EBIT of SEK 15m, -41. 0% y-o-y, for a margin of 9.

5%. We lower EBIT by 1. 0% in ‘21e due to Q2’21e gross margin We lower our assumption for Invisio’s gross margin in Q2’21e from 58.

5% to 57. 5% due to Racal Acoustics (slightly lower gross margins than Invisio’s core business) being included for a full quarter in Q2’21e. This causes an EBIT cut of 1.

0% for ‘21e. We also adjust the number of outstanding shares following the exercise of stock options. Maintain fair value DCF range SEK 125-305 per share We maintain our DCF fair value range of SEK 125-305.

Based on our estimates, Invisio is trading at an EV/EBIT of 61x-29x for ‘21e-‘23e, which is ~10% above the median of our peer group consisting of Nordic general technology peers, based on FactSet consensus. In terms of outlook, on 5 May Invisio announced its first large new order (SEK 40m) in 8 months from an existing customer in the US Department of Defense. We think that this is a first step in what we think will be a flow of positive news for the rest of the year as the US and European markets experience an easing of COVID-19-related lockdowns, causing Invisio’s customers to revisit previously delayed orders.