Nanogate’s order book of over €600m for delivery during FY19–21, we estimate a third of which relates to the industrial sector, shows the benefits of its long-term strategy of diversification from the European automotive sector. Moreover, while companies making parts for internal combustion engines will be seriously affected by the decarbonisation of transport, this trend is positive for Nanogate. Its N-Glaze and N-metals technologies offer a route for light-weighting both conventional vehicles, where they improve fuel efficiency, and electric vehicles, where the weight of batteries means reducing that of other components is essential. In addition, Nanogate’s solutions for New Mobility support the rapidly increasing numbers of sensors being deployed in vehicles as the industry moves towards fully autonomous vehicles with new models of ownership.
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A world of new surfaces
Nanogate’s order book of over €600m for delivery during FY19–21, we estimate a third of which relates to the industrial sector, shows the benefits of its long-term strategy of diversification from the European automotive sector. Moreover, while companies making parts for internal combustion engines will be seriously affected by the decarbonisation of transport, this trend is positive for Nanogate. Its N-Glaze and N-metals technologies offer a route for light-weighting both conventional vehicles, where they improve fuel efficiency, and electric vehicles, where the weight of batteries means reducing that of other components is essential. In addition, Nanogate’s solutions for New Mobility support the rapidly increasing numbers of sensors being deployed in vehicles as the industry moves towards fully autonomous vehicles with new models of ownership.
Uncertainty in automotive sector hits H119 profits
In H119 group revenues rose by 2% year-on-year to €122.2m as the increasing uncertainty of customers in the automotive sector resulted in behaviour such as delays in commencing projects, calling off lower numbers of parts on active projects and early termination of late-phase, high-margin projects. EBITDA declined by 37% to €8.0m and the group moved from €2.6m profit before tax in H118 to a €2.4m loss. Free cash outflow of €13.4m was partly offset by an oversubscribed placing raising €10.3m (gross) at €22.80/share.
Management intensifies NXI programme
Management’s response to the challenging market conditions was to intensify the Nanogate Excellence Initiative (NXI) programme, thus incurring additional restructuring costs during H219. Management has therefore revised FY19 guidance to €245–250m revenues generating €14–17m EBITDA and a consolidated net loss in the high single-digit million range.
Valuation: Waiting on NXI to deliver margin growth
Nanogate’s share price has halved from a peak of €37.10 a year ago, reflecting concerns about profitability and the automotive sector more generally. We see scope for share price appreciation as the NXI programme starts to deliver margin improvement. Consensus estimates show EBITDA margin falling from 10.0% in FY18 to 5.8% in FY19, before partly recovering to 9.5% in FY20 and reaching 11.5% in FY21, delivering a return to profit at pre-tax level in FY21 (PBT €5.9m).
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Consensus estimates
Source: Nanogate data, Refinitiv |
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Research: Financials
Between 2008 and 2018, OTC Markets Group (OTCM) recorded compound revenue growth of 11% and more than doubled its operating margin. This reflected an expanding client base, sustained investment in new products and technology and a focus on increased data-driven transparency for market participants. OTCM has gained increasing numbers of corporate clients and regulatory recognition for its premium markets, the OTCQX Best Market and OTCQB Venture Market. Prospectively, a continued focus on growing market share in its trading business, on gaining additional regulatory recognitions and on adding corporate clients, together with the addition of related services organically and through incremental acquisitions should provide the basis for long-term growth.