Fuel Efficiency And Tighter Biocide Rules Will Support Long Term Upside Potential

Catalysts

About I-Tech

I-Tech is a biotech ingredient provider focused on Selektope, a marine coating additive used to reduce barnacle fouling on ship hulls.

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

• Growing global focus on fuel efficiency and emissions in shipping supports wider Selektope adoption as shipowners look for ways to cut fuel use and comply with environmental standards, which can support revenue and earnings quality over time.
• China and broader Asian maintenance activity is already an important demand driver for hull coatings, and I-Tech is seeing strong traction here, which can underpin future volume growth and support revenue even if individual large customers are volatile.
• Rising and structurally higher copper prices make traditional copper based antifouling more expensive, increasing the relative margin appeal of Selektope powered formulations for coating makers and potentially supporting I-Tech’s pricing power and gross margins.
• Tighter biocide regulations, such as South Korea’s move toward a 1% biocide cap, favor low dosage solutions like Selektope, which is effective at around 0.1%. This gives I-Tech a potential edge that can help sustain gross margin levels and support long term earnings.
• A growing business development pipeline, including the collaboration with Havey Advanced Materials on resin and additive combinations and exploration of segments such as aquaculture and yachts, broadens the addressable market and may diversify revenue and cash flow beyond the current core shipping hull segment.

Assumptions

This narrative explores a more optimistic perspective on I-Tech 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 I-Tech's revenue will grow by 15.0% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 19.5% today to 31.3% in 3 years time.
• The bullish analysts expect earnings to reach SEK 81.3 million (and earnings per share of SEK 6.76) by about February 2029, up from SEK 33.2 million today. The analysts are largely in agreement about this estimate.
• 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 24.9x on those 2029 earnings, up from 15.8x today. This future PE is greater than the current PE for the SE Chemicals industry at 13.0x.
• The bullish analysts expect the number of shares outstanding to grow by 0.75% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 5.59%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• The proposal in the EU to classify Selektope’s active substance as an endocrine disruptor and not renew approval creates a regulatory overhang that could extend for years, with legal challenges and additional scientific studies expected to cost around SEK 8 million to SEK 9 million per year plus an estimated SEK 10 million long term study, which can weigh on net margins and earnings.
• Even though Europe is currently only 2% of sales and 5% to 8% of the global opportunity, a formal EU rejection risks tarnishing Selektope’s reputation and could influence regulators or customers in other regions over time, which may slow new product approvals and pressure long term revenue growth and earnings.
• I-Tech relies on a very small customer base, and 2025 highlighted the downside of that concentration when one significant customer cut purchases by around two thirds due to internal financial issues and high inventories, which contributed to a 33% net sales decline in Q4 and a 6% decline in full year net sales in Swedish kronor, creating ongoing volatility risk for revenue, EBITDA and cash flow.
• The business is heavily exposed to Asian shipping and maintenance activity, particularly China, Korea and Japan, so any long term slowdown in seaborne trade, shipyard output or maintenance cycles in these regions, or a reduction in tonne miles if global shipping routes normalize, could limit volume growth for Selektope and cap revenue and earnings expansion.
• Management plans to increase headcount, invest more in business development and potentially fund large regulatory studies, while also facing currency headwinds from a weaker US$, so if new partnerships, products or customer launches take longer than expected to contribute, operating costs could grow faster than sales, putting pressure on EBITDA margin and net profit.

Valuation

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

• The assumed bullish price target for I-Tech is SEK140.0, which represents up to two standard deviations above the consensus price target of SEK112.0. This valuation is based on what can be assumed as the expectations of I-Tech'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 SEK140.0, and the most bearish reporting a price target of just SEK84.0.
  
• In order for you to agree with the more bullish analyst cohort, you'd need to believe that by 2029, revenues will be SEK259.2 million, earnings will come to SEK81.3 million, and it would be trading on a PE ratio of 24.9x, assuming you use a discount rate of 5.6%.
  
• Given the current share price of SEK43.6, the analyst price target of SEK140.0 is 68.9% 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.