Motion Display - Sales beat and positive EBIT

Strong end to 2020, sales +16% vs. ABGSCe Sales forecasts kept intact, but upgraded EBIT estimates 1. 4-1. 1x ’21-‘23e EV/sales, 7% ’19-‘23e sales CAGR Q4: sales +16% above ABGSCe, EBIT was SEK 2.

0m Motion Display (MODI) had a strong end to 2020, with Q4 sales of SEK 14. 4m, for y-o-y growth of 97%. This was 16% above our forecast of SEK 12.

4m. The main driver of the rapid sales increase was the delivery of a large order (announced on 14 Oct), which was valued SEK 7. 5m.

If we exclude this, sales were relatively flat y-o-y. The gross margin of 49% remained strong (vs. 56% in Q4’19), and was higher than our forecast of 42%.

Based on the increase in sales, MODI reported EBIT of SEK 2. 0m, up vs. SEK -0.

9m in Q4’19. This was 35% (or SEK 0. 5m) above our forecast, driven by the sales beat.

In our view, the rapid EBIT increase suggests that MODI has a scalable business model, supported by its high gross margins. Estimate changes Despite the better-than-expected Q4, we keep our ‘21e-’22e sales forecasts relatively intact, as we already expect improved underlying financials (i. e.

sales excl. announced orders). That said, we lower our opex estimates, as we think that MODI will keep its fixed costs relatively flat until societies have opened up.

As such, we raise ’21-‘22e EBIT by SEK 1. 3-1. 7m.

We forecast positive EBITDA in ’21-‘23e The end-of-Q4 order book was SEK 5. 0m, which bodes well for sales growth in H1’21e. On our new estimates, MODI’s share is trading at 1.

35-1. 14x ’21-‘23e EV/sales. We forecast a 6.

1% EBITDA margin in 2021, up by 0. 9pp from 5. 1% in 2020.

We think that EBIT will remain in the red in ’21-‘22, partly because MODI has relatively high D&A costs because of its capitalised development costs on its balance sheet.