Nel (Sell, TP: NOK7.00) - Record cash burn overlooked
Nel traded up 11% after reporting Q2 sales 27% above consensus, a move we consider overdone as cash burn and accounts receivable were at record highs and order intake muted. It appears a key client (representing 30% of H1 revenues) has missed its payments, which we believe could cause some concerns among investors. Further, we estimate the current valuation implies a c30–50% market share by 2030, or 18–29GW of production capacity (versus 0.5GW today and a targeted 6.5GW including the announced gigafactory). Compared to peers, it is trading at 3–4x higher 2024e EV/sales. We reiterate our SELL and NOK7 target price.NEL ASA develops diagnostic tests for early detection of diseases. Co.'s patented method is based on identifying disease-specific gene expression signatures from sample materials, such as blood. Co.'s products in development phase include MCItect, for patients with Mild Cognitive Impairment (MCI) aimed to detect Alzheimer disease within two years prior to onset of dementia, and ADtect, for the detection of mild to moderate Alzheimer disease, as well as one project in discovery phase, namely AMYtect, for brain amyloid detection.
DNB Markets is the investment banking arm of DNB Bank ASA and is focused primarily on the Nordic region, as well as internationally on niches such as global shipping, energy and related services, and seafood. DNB Markets offers services in FICC, Equities and Investment Banking advisory from offices in Oslo, Stockholm, London, Singapore and New York. Equity research coverage is offered on c250 Nordic companies. DNB was ranked no.2 in Extel Nordic Research 2017. The DNB Markets’ Credit and FICC Macro & FX Research teams are repeatedly highly rated by Prospera Nordic Institutional Investor Surveys.
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