Maritime Data And Services Expansion Will Drive Long Term Earnings Improvement

Catalysts

About AAC Clyde Space

AAC Clyde Space provides small satellite solutions and space based data and services for customers in maritime, security and scientific markets.

What are the underlying business or industry changes driving this perspective?

• Expansion of space based data and services, including maritime intelligence and VDES connectivity, is gaining commercial traction as new satellites such as YMIR-1, Sedna-1, Sedna-2 and VIREON-1 come online. This development should support sustained revenue growth and a richer recurring income mix.
• Growing global reliance on real time maritime domain awareness and ship tracking for security, logistics and environmental monitoring is driving demand for AAC Clyde Space’s AIS and related offerings. This trend is likely to underpin higher data sales and improved earnings visibility.
• Resolution of timing issues around large institutional programs such as Sterna, SKAO and INFLECION, alongside a strong pipeline, should rebuild order backlog from 2026 onwards. This is expected to support higher top line growth and utilization driven margin expansion.
• The ongoing shift from lumpy hardware missions toward scalable products and services, evidenced by strong EBITDA of about 36 percent in data and services, positions the company to gradually enhance group level net margins as the constellation and customer base scale.
• Operational streamlining, workforce optimization and disciplined hiring ahead of major contracts are improving cost efficiency. When deferred revenues from large projects are recognized, incremental earnings and cash generation should rise faster than net sales.

Assumptions

How have these above catalysts been quantified?

• Analysts are assuming AAC Clyde Space's revenue will grow by 7.2% annually over the next 3 years.
• Analysts assume that profit margins will increase from -6.0% today to 0.6% in 3 years time.
• Analysts expect earnings to reach SEK 3.0 million (and earnings per share of SEK 0.65) by about December 2028, up from SEK -22.9 million today.
• In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 350.9x on those 2028 earnings, up from -26.6x today. This future PE is greater than the current PE for the SE Aerospace & Defense industry at 48.6x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 5.73%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Prolonged political and budgeting delays on large European programs such as Sterna, which require unanimity among EUMETSAT member states and depend heavily on key countries like France, could push contract awards further out and leave AAC Clyde Space with a depressed order backlog for longer than anticipated. This could constrain net sales and delay earnings growth.
• Persistent project execution and supplier issues, as seen on the SKAO program where a technical dispute has already prevented recognition of about SEK 30 million in revenue this year, highlight the risk that similar bottlenecks or customer mandated supplier choices could recur. This could reduce revenue visibility and operating margins.
• A structurally lumpy business model with large prepayments, heavy subcontractor costs and continued investment in the company’s own constellations, coupled with reliance on extended overdraft facilities, raises the risk that volatile cash flows and potential negative operational cash flow beyond the short term could undermine balance sheet resilience and the path to sustainable earnings.
• If the anticipated ramp up in data and services from new satellites, including YMIR-1, Sedna-1, Sedna-2, INFLECION and VIREON-1, is slower than expected because customers take longer to integrate VDES and maritime intelligence into daily operations, the company may not achieve the forecast scale benefits and high EBITDA contribution. This would limit future improvements in group net margins.
• A weaker than expected recovery in missions and products demand, combined with workforce reductions and hiring delays around large contracts, could leave AAC Clyde Space with insufficient capacity or competitiveness should industry growth shift towards other operators. This would pressure long term revenue potential and cap earnings expansion.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The analysts have a consensus price target of SEK111.0 for AAC Clyde Space based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• In order for you to agree with the analysts, you'd need to believe that by 2028, revenues will be SEK473.3 million, earnings will come to SEK3.0 million, and it would be trading on a PE ratio of 350.9x, assuming you use a discount rate of 5.7%.
  
• Given the current share price of SEK93.7, the analyst price target of SEK111.0 is 15.6% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.