Safety Adoption And Smart Helmet Technology Will Drive Powerful Long Term Upside

Catalysts

About Mips

Mips develops and licenses helmet safety systems designed to reduce rotational forces in head impacts across sports, motorcycle and industrial safety helmets.

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

• Rapid adoption of higher safety standards in construction and industrial settings, combined with Mips based helmets winning Best in Show and multiple listings at the NSC safety show, supports a wider rollout of Safety products that can lift segment revenue and mix driven gross margin over time.
• Four consecutive quarters of more than 50% growth in Europe and rising brand awareness programs in key markets like Germany and France point to growing helmet penetration for Mips solutions, which can expand total sales while supporting high gross margins through premium positioning.
• Industry interest in combining Mips with smart sensor technology such as Quin, already visible in Guardio and PIP helmets, opens up a higher value product tier where added functionality can support higher average selling prices and potentially stronger EBIT margins.
• Ongoing production shifts by helmet brands from China to countries such as Vietnam to manage tariff exposure, together with Mips focus on global OEM relationships rather than any single factory base, can support more resilient volumes and reduce tariff related noise in EBIT over time.
• Continued market share gains in a soft U.S. bike market, driven by volume rather than price increases, together with strong gross margins above 73% and an EBIT margin that reached 42% in the quarter excluding legal costs, indicate that operating leverage on future volume growth could support earnings and operating cash flow.

Assumptions

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

• The bullish analysts are assuming Mips's revenue will grow by 40.0% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 26.0% today to 46.6% in 3 years time.
• The bullish analysts expect earnings to reach SEK 677.4 million (and earnings per share of SEK 25.87) by about January 2029, up from SEK 138.0 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as SEK469.4 million.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 29.7x on those 2029 earnings, down from 56.3x today. This future PE is lower than the current PE for the GB Leisure industry at 40.0x.
• The bullish 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?

• A prolonged period of weak bike demand in the U.S., highlighted by declining sales at large bike manufacturers and forecast downgrades in the wider bike ecosystem, could limit helmet volumes and reduce the benefit of Mips gaining share. This would put pressure on revenue growth and earnings.
• Heavy reliance on the U.S. for the Safety category, where about 90% of Safety sales are currently exposed to tariffs and cost increases, risks a structurally slower rollout of new products if customers keep deprioritizing helmets. This could weigh on segment revenue and constrain margin expansion.
• Persistent tariff uncertainty and production shifts from China to other Asian countries could keep creating short term disruption in ordering patterns and costs for helmet brands. This may lower near term order visibility for Mips and create volatility in net sales, EBIT margin and operating cash flow.
• Growing attention on alternative rotational or safety technologies such as RLS and independent test protocols that initially do not fully capture rotational performance, like the current Virginia Tech safety helmet test, could limit pricing power or unit adoption for Mips based systems over time. This would affect gross margin and long term earnings potential.

Valuation

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

• The assumed bullish price target for Mips is SEK650.0, which represents up to two standard deviations above 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 bullish 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 bullish analyst cohort, you'd need to believe that by 2029, revenues will be SEK1.5 billion, earnings will come to SEK677.4 million, and it would be trading on a PE ratio of 29.7x, assuming you use a discount rate of 5.3%.
  
• Given the current share price of SEK293.2, the analyst price target of SEK650.0 is 54.9% 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.