Analysis Clean Industry Solutions: Pipeline and macro environment getting stronger

10% hit-rate could mean around 5x current market cap
Clean Industry Solution’s subsidiary Industrial Solar offered a total of 90 solutions to prospective clients in 2021, representing a turnover potential of around 2 billion SEK. Some of these have resulted in orders and many are still pending. In Q1 the company reports on a “drastically increased demand for its renewable energy solutions”.

Clean Industry Solutions is based in Germany with its two subsidiaries Industrial Solar and SolarSpring. The effects of the Ukraine crisis have put especially Industrial Solar in the middle of a positive macro situation regarding demand. Return on investment on its offered services ranging from system engineering to full implementation of renewable energy systems, gets better with higher energy prices. The political factor has been added where most want to be independent from Russian gas as soon as possible. Finally the clock with need for climate change is ticking faster and faster.

In a positive scenario the big pipeline of offers starts to pay off in a clear way. 10% hit-rate could mean a turnover of around 200 MSEK which can be compared to current market cap of around 40. One big order or several smaller ones would most likely trigger a new trend for the stock that has been very weak from the start of the pandemic.

Holistic approach to a sustainable industry
During the pandemic, Clean Industry ramped up its sales activities in Germany with appropriate solutions in terms of climate and solar irradiation. Expansion towards photovoltaic systems and hybrid photovoltaic-solar thermal systems has strengthened the position in the market and is in line with the overall strategy to offer holistic solutions for a sustainable industry. The company is not dependent on one technology and seeks the combination of solutions to step by step help clients to become cleaner.

Growth continues - but still at a low level
The company has during the pandemic invested in its organization that now consists of more than 30 people. Competence and credibility is already there and can be exemplified with the participation in several publicly funded R&D programs. The switch to Nasdaq First North, improved marketing and web sites are other examples that the infrastructure are there to start a growth journey. Q1 net sales amounted to MSEK 0,4 (0,1) and is 3,7 the last 12 months. Including other income from different R&D projects total income is close to 13 MSEK the last 12 months. The company has net cash at MSEK 9 which can be related to the cash flow during Q1 at -5,4. Analysguiden estimates that additional funding will be needed this year.

The high potential and high risk are reflected in our fair value range 2 – 11 SEK for the coming 12 months. Base case is 3,50 SEK which can be compared to the directed rights issue in December 2021 at 3,20 SEK. The base scenario is lower than previous analysis due to higher discount rate and lower assumptions on long term margins. A journey towards the positive scenario can however start any day if the significant offer base starts to materialize.