Canatu 2024 flash comment: Growth outlook for this year remains unclear

Translation: Original published in Finnish on 03/28/2025 at 09:55 am EET

Canatu reported strong growth figures this morning, boosted by the semiconductor sector, although revenue slightly missed our estimate due to the automotive industry. EBIT was slightly more in the red than expected (falling even more short of consensus), as the gross margin decreased contrary to our expectations due to the first reactor deliveries. Canatu did not yet provide guidance for 2025, but according to the company, 2025 revenue will focus on H2 due to potential new reactor orders. The company estimates that its long-term potential has remained unchanged in all business areas, and in the investor story, expectations are focused on strong earnings growth after 2027. In light of the slightly weaker-than-expected figures for 2024 and the unclear growth outlook for this year, there is downward pressure on our and consensus earnings estimates, at least for this year.

Revenue grew strongly but fell slightly short of our expectations

Canatu’s 2024 revenue grew by 62% to 22.0 MEUR, falling slightly short of our 22.7 MEUR estimate (consensus 22.4 MEUR). The company’s guidance for 2024 expected growth to 20-25 MEUR, so the outcome was slightly below the mid-point of the range. As we expected, growth was driven by the semiconductor industry (19.7 MEUR, +77%), where the first two reactor deliveries to customers were visible as strong growth. In the automotive industry, revenue decreased by 7% to 2.3 MEUR, while we expected 25% growth. The decrease was, according to the company, due to lower revenue from one of the main customers, who was destocking.

The weaker gross margin explains the deeper operating loss than we expected

Canatu's adjusted EBIT was -4.8 MEUR last year (2023: 0.6 MEUR), when our forecast was -3.4 MEUR and the consensus was -1.7 MEUR. The underperformance relative to our estimate is mainly explained by the weaker gross margin (2024: 62.5% vs. 2023: 71%) compared to 2023, while our forecast (70%) expected a stable development. The decline in the gross margin reflects the deliveries of the first two reactors and the resulting change in the product mix. In 2024, the company continued strong recruitment and other investments, and with the SPAC listing, the company had to also bear certain costs previously attributable to Lifeline SPAC I and other new costs arising from the listing. By the end of the year, the number of employees had increased to 137 (2023: 109). The dividend taps remained closed as expected and capital is geared towards pursuing strong growth. The company's very strong balance sheet provides excellent conditions for this, and despite the investments already made, Canatu's net cash position at the end of the year was 92 MEUR.

Uncertainty remains concerning this year's growth outlook

Canatu did not yet provide guidance for 2025, but according to the company, 2025 revenue will focus on H2 due to potential new reactor orders. In addition, in the automotive industry, the start of mass production of ADAS camera heaters has been delayed due to certain customer processes. Canatu expects mass production ramp-up to begin in 2025. At the same time, Canatu expects its cooperation and future solar cell development work to progress, which would have a positive impact on automotive revenue this year.

As expected, the semiconductor industry will account for the largest share of this year's revenue, but based on the company's comments, the magnitude and timing of revenue appear to be largely dependent on customer decisions. For the first reactors, customers still need to complete the approval tests before volume production of pellicle membranes can start. Canatu also expects that any further reactor orders from existing customers will likely depend on the successful completion of the final acceptance tests of the first two reactors and related equipment. Canatu expects acceptance tests to be completed in 2025.

Our estimate for this year expected revenue to increase to 30.3 MEUR (consensus: 35.2 MEUR) and, due to growth investments, EBITDA (0.0 MEUR) and adjusted EBIT (-2.4 MEUR) to remain modest. The consensus expectation for EBITDA was 3.55 MEUR. In light of last year's figures and the outlook comments, we believe that there is initially clear downward pressure on this year's earnings estimates, especially for the consensus. We point out that Canatu's growth expectations are particularly focused on 2027 when the company aims to achieve a revenue of more than 100 MEUR and an adjusted EBIT margin of more than 30%. We believe the key to growth will be the ramp-up of the reactor business, which will lead to growth in recurring revenues from royalties and non-discretionary consumables in the years ahead. According to Canatu, the company's long-term potential in its three business priorities has remained unchanged.