CyanConnode: 1H’22 update – strong shipments and cash inflows

Hardman & Co

Alongside the multiple new contracts signed in fiscal 1H, CyanConnode Holdings plc (LON:CYAN) smart meter intelligent module shipments continued to accelerate during the period. 315,000 modules were shipped, versus 92,000 in the same period last year and 481,000 for the entirety of FY’21. 1H’22 revenue came in at £4.1m, almost three times the comparative 1H’21 figure of £1.5m. The potentially immense market opportunity is starting to translate into large orders, accelerating shipment volumes, exceptionally strong revenue growth and cash inflows – £3.8m was received from customers during the period, resulting in £1.7m net cash at end-September 2021. Our updated DCF-implied fair equity value for CyanConnode is £89.6m.

  • On track to meet FY’22 estimates: Together with new contracts, the 1H’22 outturn supports our financial projections for FY’22 and beyond. We expect revenue to triple over 2021-23, accompanied by a strong move into profitability in FY’23. Larger contracts and opex-centric deals will create growing visibility.
  • Acceleration in module shipments: 315,000 Omnimesh modules were shipped during the period, across gateways and relating to current contracts, a marked uplift of over 200% versus 1H’21. Contracts for almost 300,000 modules have been signed since the year-end. Revenue recognition across these contracts will vary.
  • Indian opportunity remains front and centre: Acknowledging the sluggish pace of smart meter installations, the Indian government is implementing multiple measures to compel faster progress. These include financial incentives and proposed legislation that will allow private distribution companies to enter the market.
  • CyanConnode is well-positioned in India: Major factors include the depth and scalability of the technology platform, the neutrality of the Omnimesh platform with respect to meter manufacturers, the reference deployments in India, partnerships with key entities, and the quality and experience of management.
  • Investment summary: Our revenue estimate for FY’22 (to end-March) of £9.3m continues to be based largely on existing contracts. CyanConnode remains in discussions for new contracts in several existing and new markets. The company has continued to manage its supply chain deftly, and replenishments have been uninterrupted. Our DCF-implied equity fair value is £89.6m (£0.41 per share), versus the current market capitalisation of £26.2m.
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