Freemelt – Expect a good Q4 – ABG

Fair value range of SEK 9-18 (9-21)
Q4e: strong Freemelt ONE sales and an insurance one-off
For Q4e, we expect sales of SEK 12.8m as well as a one-off insurance payment of SEK 4.5m for the Freemelt ONE system that was damaged during transportation (likely reported under other operating income). During the quarter Freemelt received three orders for (and delivered three) Freemelt ONE systems. We expect this will translate into payment for three systems at an average price point of SEK 4.3m, as two of the three systems delivered were sold in the US where a somewhat higher price is charged than in Europe. We estimate EBIT of SEK -4.0m (SEK -2.6m adjusted). The expected improvement with respect to Q3, when EBIT came in at SEK -12m, is explained by the higher sales volume as well as the one-off insurance payment.

Capital would be good, but maybe not absolutely necessary
We make no changes to our ’23-’24 sales estimates, but revise adjusted EBIT by SEK 1m and -4m following more detailed D&A estimates as well as a slight increase in opex in ’24e. We are encouraged by the continued strong Freemelt ONE order intake, particularly the increase in sales in the US, which has a large R&D market. The company has still not raised additional capital, and if it maintains its current spending level we expect it will run out of cash towards the end of Q1’23. In light of the strong Freemelt ONE order flow, we believe the company may be able to cut R&D costs enough to keep operating with a focus on selling the Freemelt ONE, in case it is unable to raise more capital. This would however likely be suboptimal as cutting costs would probably delay the industrial eMELT printer.

Fair value range of SEK 9-18
We adjust our fair value range slightly to SEK 9-18 per share (9-21). The share is down 48% over the past year, likely in part due to the perceived financing risk.—expect-a-good-q4/

ABGSC Commissioned Research