Catalysts
- Product Expansion: I-Tech's antifouling agent, Selektope, has been integrated into the product portfolios of six major global paint manufacturers, with ongoing development in others. This broadening adoption indicates a growing market acceptance and potential for increased sales.cr.abgsc.com
- Total addressable market (TAM) between USD 350 million and USD 500 million. i-tech.se
- Kicker would be that the EPA in the US initiates the review process for selectope opening up an new market.
Assumptions
- Revenue Projections: Assuming continued adoption of Selektope by major paint manufacturers its expected that growth will continue at about 28%. This projection is below current growth trends (around 45% in last two years) but more reasonable in the long term as the law of large numbers kick in.
- Profit Margins: Profit margins are expected to improve as economies of scale are realized and operational efficiencies are enhanced 21% --> 26% in the upcoming five years.
Risks
- Regulatory Challenges: The renewal process for Selektope's approval within the EU presents a significant risk. Any unfavorable decisions or delays could impact sales in European markets and potentially influence approval process in other regions.
- Market Dependence: A substantial portion of I-Tech's sales is concentrated in the Asian market, particularly with major customers like Chugoku Marine Paints. This reliance poses a risk if market dynamics shift or if there's a downturn in these regions.storage.mfn.se
Valuation
- Given the sizeable market size I assume the company can defend a 22-27 PE ratio also going forth, assuming the growth rate will not decline in the commings years.
- Discount rate --> 9% due to the small size of the company and high customer dependence - CMP accounted for about 80% of total sales. However, in 2024 the customer base has diversified—with over one‐third of total sales now coming from other companies. The regulatory process will not affect the short term discount rate as the outcome will have little to no impact on the short/mid term revenue, (but may have in the long term, e.g. 2029 when Korea will renew Selectope approval)
To be on the lookout for in the upcoming Q-reports
- Top-Line Growth: Monitor quarterly revenue figures to ensure they align with the projected 26% growth trajectory (over time). Consistent revenue growth is essential for meeting long-term financial targets.i-tech.se
- Cash Flow Management: Despite the significant increase in sales, operating cash flow remained relatively flat, with SEK 35.17 million in 2024 compared to SEK 35.14 million in 2023 (despite the growth in earnings). This stagnation suggests that increased revenues are not translating into proportional cash flow improvements. This needs to be improved over time.i-tech.se
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Disclaimer
The user Mandelman has a position in OM:ITECH. Simply Wall St has no position in any of the companies mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The author of this narrative is not affiliated with, nor authorised by Simply Wall St as a sub-authorised representative. This narrative is general in nature and explores scenarios and estimates created by the author. The narrative does not reflect the opinions of Simply Wall St, and the views expressed are the opinion of the author alone, acting on their own behalf. These scenarios are not indicative of the company's future performance and are exploratory in the ideas they cover. The fair value estimates are estimations only, and does not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that the author's analysis may not factor in the latest price-sensitive company announcements or qualitative material.
