European Dependence And Supply Chain Risks Will Challenge Helmet Safety Upside Potential

Catalysts

About Mips

Mips develops helmet safety systems that aim to reduce rotational forces in impacts across sports, moto and industrial safety categories.

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

• Although Europe is showing strong demand for Mips equipped sports helmets and now represents about 40% of company sales after four quarters above 50% growth, the concentration of growth in one region increases exposure to any slowdown in European consumer spending. This could limit revenue progression if other regions do not catch up.
• While the Safety category has promising traction with more brands and products, including award winning helmets in the U.S., the heavy reliance on a U.S. construction market that is sensitive to tariffs and cost inflation may delay the expected ramp in order volumes. This could hold back both net sales and EBIT margin in that category.
• Although relocation of helmet production from China to Vietnam and other Asian countries can over time reduce tariff risk, the transition period carries execution risk around supply chains, lead times and certification. This may create temporary pressure on revenue and gross margin if brand partners face disruptions.
• While rising safety awareness and regulation in bike and industrial helmets support broader adoption of Mips and Quin technologies, the fact that helmets are often a low priority product for large safety companies means Mips equipped models can be down prioritised in their portfolios. This could slow the pace of mix shift toward higher margin safety products and delay earnings growth.
• Although the company is increasing consumer marketing, including trailer based events and awareness programs in Germany with a goal to move non user awareness from 17% to 30%, these efforts require continued marketing and R&D spending. If conversion from awareness to Mips equipped helmet sales is weaker than planned, EBIT margin recovery toward long term targets could take longer.

Assumptions

This narrative explores a more pessimistic perspective on Mips compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts. How have these above catalysts been quantified?

• The bearish analysts are assuming Mips's revenue will grow by 31.1% annually over the next 3 years.
• The bearish analysts assume that profit margins will increase from 26.0% today to 38.7% in 3 years time.
• The bearish analysts expect earnings to reach SEK 462.3 million (and earnings per share of SEK 17.48) by about January 2029, up from SEK 138.0 million today. However, there is some disagreement amongst the analysts with the more bullish ones expecting earnings as high as SEK667.0 million.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 30.8x on those 2029 earnings, down from 62.9x today. This future PE is lower than the current PE for the GB Leisure industry at 43.0x.
• The bearish analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 5.27%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Heavy dependence on Europe for growth, with Europe now around 40% of sales and driving recent volume momentum, means any longer term slowdown in European consumer demand for sports and Moto helmets could hit the main growth engine and weigh on revenue and EBIT margin.
• The U.S. remains critical for Safety and Moto, yet tariffs, cautious bike demand, and helmets being a lower priority product for large safety companies could lead to prolonged order delays, limiting volume growth and holding back net sales and earnings.
• Relocation of production from China to Vietnam and other Asian countries to manage tariff exposure introduces ongoing execution and certification risks, so extended disruption or higher costs in these supply chains could pressure gross margin and EBIT.
• Legal expenses of SEK 36 million year to date and continued spending into Q4, even if expected to ease in 2026, highlight that unexpected legal or compliance issues can reappear over time and compress EBIT margin and operating cash flow.
• Competitive technologies such as RLS scoring highly in independent helmet tests, and incomplete test protocols that do not fully capture rotational protection, could dilute Mips specific differentiation in the long run and limit pricing power, which may cap gross margin and earnings growth.

Valuation

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

• The assumed bearish price target for Mips is SEK460.0, which represents up to two standard deviations below the consensus price target of SEK537.5. This valuation is based on what can be assumed as the expectations of Mips's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of SEK650.0, and the most bearish reporting a price target of just SEK460.0.
  
• In order for you to agree with the more bearish analyst cohort, you'd need to believe that by 2029, revenues will be SEK1.2 billion, earnings will come to SEK462.3 million, and it would be trading on a PE ratio of 30.8x, assuming you use a discount rate of 5.3%.
  
• Given the current share price of SEK327.6, the analyst price target of SEK460.0 is 28.8% 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.