Metacon Q4'24: Risk/reward profile has turned attractive

Metacon’s Q4 report fell below our expectations, with lower-than-expected revenue recognition from the Motor Oil order and higher fixed costs. We acknowledge the significant risks and uncertainties surrounding Metacon’s ability to consistently secure large-scale orders and maintain sufficient working capital to fulfill them. However, at this stage, we believe the company is well-positioned to obtain additional short-term funding, if needed, on reasonable terms. With increased near-term revenue visibility, where our 2025 revenue estimates are largely covered by the existing order book, we believe the recent drop in valuation presents an attractive entry point. While we maintain our target price of SEK 0.12 per share, which is at the lower end of our acceptable valuation range, the current valuation offers an attractive risk/reward profile, as the share price has fallen by around -23% and the expected return exceeds our required return. Consequently, we raise our recommendation to Accumulate (previously Reduce).

Q4 revenue increased, but profitability remains negative

Metacon’s Q4 revenue increased significantly to 16.0 MSEK (Q4’23: 0.7 MSEK), driven by the ramp-up of the Motor Oil order. However, revenue recognition lagged our expectations due to project completion timing. While no new orders were secured in Q4, total order intake for 2024 rose sharply to 226 MSEK (2023: 45.9 MSEK), primarily due to the large-scale Motor Oil order. Profitability remained weak, with Q4 EBITDA at -33.4 MSEK, impacted by higher temporary costs related to scaling up for larger deliveries. Despite this, operating cash flow improved to 25.0 MSEK, supported by strengthened working capital. Additionally, the 110 MSEK rights issue in Q4 strengthened the cash position to 124.4 MSEK by the end of the quarter, although 45.3 MSEK remains restricted. With liquidity still tight, the timing of cash flow releases from the Motor Oil project will be crucial in determining when additional financing is needed. However, an estimated burn rate of 25-30 MSEK, we believe Metacon should manage to continue its operations with current available cash of 79 MSEK, until the bank guarantees (total of 180 MSEK) from the Motor Oil order are released in June/July, according to our updated estimates. If the burn rate would be higher than our estimates or the timing of the release of bank guarantees would be delayed, we believe that the short funding gap should be able to be covered by debt or some project financing. 

Lower short-term estimates due to lack of new orders

With no new orders since mid-Q3’2024 and long lead times for large-scale projects, we have lowered our 2025 revenue estimates by approximately 12%. This has also led to an 8% reduction in our EBITDA forecast, though the high proportion of variable costs has softened the impact. Our 2025 forecast assumes that most of the Motor Oil order will be recognized as revenue and that a new large-scale project will begin ramping up in late 2025, albeit with limited revenue contribution in current year. For 2026, our estimates remain largely unchanged, but future revenue growth highly depends on order intake accelerating throughout 2025 and 2026.

Risk/reward turns favorable at current valuation

Our estimated value per share ranges from SEK 0.06-0.22 per share (prev. 0.06 to 0.25), slightly lower due to reduced estimates. With short-term funding secured, Metacon can now refocus on executing its growth strategy, and we expect to see clear signs of progress to emerge as early as this year. However, uncertainty remains regarding the company's ability to secure additional large orders on a consistent and profitable basis. This increases forecast risks and makes it difficult to justify the upper end of our valuation range. Furthermore, based on our current forecasts, we cannot rule out the need for the company to raise additional capital in 2025 and 2026. Given these factors, we maintain our target price at the lower end of the range, at SEK 0.12 per share. However, as the valuation has continued to decline since our last research update (share price -23%), we believe the risk/reward profile has turned favorable.