Surface Transforms: Major OEM 10 order, OEM 8 delay resolved

Hardman & Co
[shareaholic app="share_buttons" id_name="post_below_content"]

Surface Transforms plc (LON:SCE) The 24 November OEM 10 order raised the order book 50%. Even before this, it had quadrupled in under two years. This latest £100m lifetime (six-year) order with OEM 10 is the second order from this US mega-OEM – a major cornerstone. The order book is now £290m. SCE has visibility of the order inflow. It had stated, in the autumn, that a new order would come before end-2022. A major milestone was achieved this half-year, as SCE registered several profitable months. The production ramp-up is very large, and the exciting growth at OEM 8 hit a pocket of air turbulence, knocking that ramp-up a little, affecting 2022 profits, but not 2023.

  • Order book up six-fold in under two years: Three OEMs generate 2023E revenue, five in 2024E. End-sales of these models have waiting lists themselves, which adds visibility too. The models are mid- to upper-mid-market, and Surface Transforms now has minimal exposure at the super-car end, which reduces demand-risk.
  • Growth ramp-up: The growth ramp-up has now taken place. When many businesses are seeing gross margins fall, SCE has not; indeed, we upgrade our 2022 gross margin estimates. But a combination of OEM 8’s further rescheduling and capacity at its fullest pre-2023 expansion has meant a hit to 2022 profits.
  • Numbers change: 1H’22 sales were £2.9m, generating £2.5m losses. We cut our 2H’22E sales of £9.6m to £3.6m. OEM 8’s order remains £100m, but start of production and ramp-up were delayed due to OEM 8 engineering issues. We raise our 2025E sales and profits significantly. Earlier, we raised 2024E EPS by 38%.
  • Risks: SCE states: “The Company has also had its own production challenges, now materially rectified, and whilst they were neither the reason for the [OEM 8] ramp up delay, nor the bulk of the sales shortfall, have limited the Company’s ability to build a finished stock buffer”. A new plant is scheduled to open in 2H’23.
  • Investment case: Surface Transforms is rapidly growing its 10% market share in this fast-growth market. OEM 10 and OEM 8 have both placed several orders, and, while true “game changers”, these have simply fitted into the broader SCE place in the market expansion. 2H’22 saw OEM 9 arrive too. SCE delivers on a global OEM base, margins are robust and production expansion is happening.

DOWNLOAD THE FULL REPORT

Share on:
Find more news, interviews, share price & company profile here for:

Surface Transforms Delivers 72% Revenue Surge on Turnaround of Manufacturing Operations

Delivering sustainable improvements in output, yield and quality. Cautiously confident this level of performance will be maintained in the second half of the year

Liverpool’s brake disc reinvention

A north Liverpool manufacturer has transformed its fortunes by uniting R&D and production in one plant, driving efficiency gains that underpin renewed growth.

Surface Transforms H1 2025 revenue up 72% as yields rise

Surface Transforms expects H1 2025 revenue of about £8.1m, up 72% year on year. Q2 yield improved to 77% from 49% in Q1. Customer advances reached £12.9m, with repayments due in H2.

Surface Transforms Carbon Discs for 430 Scuderia

Surface Transforms has engineered a revolutionary carbon ceramic disc for the Ferrari 430 Scuderia, combining continuous interwoven carbon for vastly improved durability and heat management.

Atlantic accord signals a shift in Britain’s automotive landscape

Britain’s bespoke US trade deal and new industrial strategy are setting the stage for specialised surface engineering firms to drive the next wave of automotive innovation.

The rise of carbon-ceramic systems

Advanced carbon-ceramic brakes are reshaping vehicle safety and performance, offering unrivalled heat resistance, durability and reduced unsprung mass. Surface Transforms, the UK’s sole automotive producer of carbon-ceramic discs, exemplifies this technological momentum.

Search

Search