Analysis Clean Industry Solutions: Very low valuation

Detta är en betald analys på uppdrag av Clean Industry Solutions Holding Europe utförd av Analysguiden

Clean Industry Solutions meets a strong order intake and a solid demand. Analysguiden expects good times ahead and finds the valuation attractive.

Good times ahead
Clean Industry Solutions Holdings Europe (CISH) is probably in a better situation now than ever before. Order intake is increasing, and the longterm demand for Greentech solutions looks very promising. The return on investment (ROI) for many of the company’s solutions has gone down from often more than 10 years to being around 5 or below. New public regulations also gradually come into place and support demand.

Examples of recent new orders are photovoltaic (PV) fence (MSEK 2) and normal PV-system (MSEK 9) to two customers in Germany. The company will do an engineering study (value 0,5 MSEK) at one of the largest textile suppliers to H&M, Arvind in India. In October, CISH announced a letter of commitment with an order value of around MSEK 50. This was a decisive step towards the final comprehensive contract comprising the supply of a solar process heat system at customer KEBE’s factory Greece. The plan is to sign the final contract in Q1 2023. The value of total quotations continues to be strong. Operating income is up 36% YTD versus last year, but the absolute level is still low, MSEK 10.

CISH has secured funding. It received around net MSEK 12 in a rights issue conducted in October. Both subsidiaries, Industrial Solar and SolarSpring, could also secure further public funding: SolarSpring won two grant agreements for European R&D projects and Industrial Solar one for a nationally-funded R&D project on artificial intelligence. In total, with other programs, CISH has funding of around MSEK 40. Participation in these R&D programs contributes to the development of the company’s solutions and differentiation in the market as a knowledgeable partner.

With the above background, it could be expected that the stock price development would have been relatively positive. This has not been the case. Market value has dropped significantly under low trading volumes in conjunction with the rights issue. Enterprise value, including cash from rights issue is only around MSEK 10.

Step change in sales is expected 2023-24
Analysguiden expects a strong increase in invoiced sales in 2023 and 2024 based on already received orders and current strong demand in the market. The several engineering studies that are being conducted is a first step towards larger order volumes, even though lead times can be long. CISH is a broad solution provider for a sustainable industry and circular economy, which means several opportunities. It uses both external products and own products such as the Fresnel collector included for example, at Kebe, Greece. Interesting products from SolarSpring include purification units and membrane distillation units. These products can be used for example to generate ultra-clean water for hydrogen production and at sewage treatment plants in the reduction of CO2 emissions and production of fertiliser.

The fair value in the DCF analysis is 3.00 SEK and corresponds to a market value at MSEK 76, just slightly above forecasted net sales in 2024. The company already has many references around the world, but a few contracts of the above mentioned potential Kebe deal, would probably be a complete game changer for the stock price.