This is a commissioned analysis by Analysguiden.

Tough comparables in the fourth quarter

Net sales for the fourth quarter amounted to SEK 31 million, which was slightly above our expectations of SEK 30 million. Compared to the previous year, this was a halving, but the figures for the corresponding quarter last year include a large order of SEK 43.6 million. Adjusted for the 74% year-on-year increase in net sales. As large orders come in irregularly, fluctuations in net sales on a quarterly basis are common and need to be kept in mind. By comparison, the situation was the reverse in the previous quarter for the company. The gross margin increased slightly to 29.8% from 29.1% in the same period. Annual recurring revenue (ARR) was virtually unchanged compared to the previous quarter and amounted to SEK 6.6 (6.5) million. On an annual basis, ARR amounts to SEK 26.2 (25.5) million. The component shortage, which was addressed in the third quarter, has continued in the last quarter. In some cases, delivery times are now up to six months, with the result that the company has not been able to deliver to the extent planned. This, combined with no major orders in the quarter, resulted in an ebitda result of SEK 0.7 (1.3) million and an ebit result of SEK -0.3 (0.3) million. During the last quarter, the company also incurred additional costs to be approved for trading on the OTCQX trading platform in the US. These costs are estimated to amount to approximately SEK 0.5 million. Profit for the period for the last quarter ended at SEK -0.3 (0.3) million and earnings per share at SEK -0.22 (0.21).

Company prepares for share trading in the US
In the fourth quarter, the company has been working on getting its shares approved for trading on the US OTC Markets and the OTCQX trading platform. It is a platform for trading securities that are not listed on a national exchange in the United States. The purpose is to facilitate and enable trading in the company’s shares, but also to meet the increased interest from US investors. Especially around the AI-related services, solutions and concepts that CGit is working on. It also increases access to the US capital markets going forward.

The prolonged component shortage affects the target price
We assumed that the component shortage would be more short-lived than it turned out to be and this leads us to adjust our view on a reasonable target price. Given that the company continues to execute according to plan and is now also enabling US investors to invest in the company, we believe that the long-term target price is SEK 123 (140) in 12 – 18 months, but that the stock is reasonably valued at around SEK 80 – 90 in the near term. It all depends on how long the component shortage lasts, which is difficult to predict. For 2023, we expect the company to continue to take significant orders in AI and further strengthen its position as a leading provider of AI solutions as in previous years.

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This is a paid analysis commissioned by CGit Holding and conducted by Analysguiden