VIGO Photonics: PIC(k) tech, made in Poland (stays BUY)
We reiterate our BUY rating on VIGO Photonics and set our price target (PT) at PLN 593/share, implying 32% upside potential. In 2023, the company tackled the two main challenges (the reduced size of orders from Safran and supply chain issues) that harmed its results in the previous year, and recorded a results expansion, driven by strong demand for its military segment products, as well as the price hikes completed in 1Q23. From 2024E, we expect the growth to be driven by solid demand for both industrial and military detectors; while, from 2025E, we assume that VIGO develops a new revenue stream: infrared arrays, which should additionally boost its military segment sales growth. As a result, we forecast 2022-25E CAGRs of 39% and 51% in the adjusted EBITDA and net profit, respectively, for VIGO. The equity story is also spiced up with the EC’s announcement to grant VIGO State aid of up to EUR 103m, to develop photonic integrated circuits under the HyperPIC – a project that can multiply its business size. On our forecasts, VIGO is trading at EV/EBITDAs of 13.1-10.2x for 2024-25E, at 6-18% discounts vs. its peers.Vigo System SA is a Poland-based company engaged in the production of detectors business sector. The Company is a manufacturer of standard and customized High Operating Temperature cadmium mercury telluride (HgCdTe) detectors. The Company's products are divided into three categories, including Infrared Detectors, Infrared Cameras and Measurement Equipment. The Company sells its products worldwide, including the United States, Canada, Finland and Australia, among others. It also cooperates and sells the products to NASA.
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