We reiterate our Sell recommendation for Hexicon but increase our target price to SEK 0.20 per share (prev. SEK 0.14). While we view the recent divestment as positive, as it reduces the financing risk somewhat and indicates confidence in the company’s ability to divest early-stage projects successfully, we believe that the valuation has risen to high levels. Additionally, we anticipate the need for further financing in the coming months, leading us to perceive the risks as too great for the time being to rely on the potential.

Hexicon’s Q4 report contained no major surprises. In the context of a challenging operating environment, the company continues to experience long divestment processes and negotiations. As a result, we expect the establishment of a long-term ownership structure for the MunmuBaram project, which could provide near-term financing and improve cash flow for project development, to be delayed until around summer 2025. In our view, the company needs additional capital in the coming months, forcing Hexicon to explore other financing options on uncertain terms. Against this backdrop, we believe the near-term risk/reward is unfavorable.

Hexicon will publish its Q4 results on Wednesday, February 19, at 8:00 am CET. We expect the company’s revenue to continue to be modest, driven mainly by consulting fees. In the bigger picture, we believe that project divestments will be the main growth driver in the coming years. We therefore look forward to hearing more details on potential divestments, with a particular focus on the important MunmuBaram project.

Recent developments in Hexicon’s project portfolio have been mixed, in our view. While the MunmuBaram project finally received regulatory approval, the Swedish Government rejected two key projects, affecting the valuation negatively. Furthermore, Hexicon is still in need of immediate cash infusion, and we believe it will be difficult for the company to overcome the downward pressure from the expected equity issue, the high cash burn, and the remaining question marks concerning the structure of the MunmuBaram divestment. Against this backdrop, we believe that the near-term risk/reward profile is unfavorable. Consequently, we revise our recommendation to Sell (was Reduce) and lower our target price to SEK 0.14 (was 0.23), reflecting the negative impact of the reduced net capacity in the project portfolio and aligning with our SOTP valuation.

Hexicon will publish its Q3 results on Friday at 8:00 am CET. We are interested in any updates on potential divestments, with a particular focus on the important MunmuBaram project. In addition, we are looking for the company's comments on how the recent news that the Swedish government has rejected applications for two of Hexicon's projects affects the value of the project portfolio and the company's other project in Sweden.