We upgrade our recommendation for Creotech to BUY (previously: HOLD) with a 12-month target price of PLN 235.6 (previously: PLN 245.4). The change in recommendation direction is a result of the weaker share price behavior in recent months, which has increased valuation upside. At the same time, we have revised downwards revenue levels for the current year and subsequent years due to assumed weaker growth rates in electronics manufacturing (we expect PLN 8.5mn this year vs. 10.3mn previously) and science (we assume PLN 7.2mn in ‘24e vs. 10.8mn previously and a delay in margin improvement in subsequent years).
- Creotech S.A. reported revenues of PLN 44.1mn in ‘23 (+41% y/y) and an operating loss of PLN 16.9mn vs. 8.7mn a year earlier. The widening loss was a consequence of a 46% y/y increase in operating expenses. The company made a share issue in H2 ‘23, which improved its balance sheet position and allowed it to end the year with net cash of PLN 49.2mn. We assume that in ‘24e the company will manage to increase revenues to c. PLN 52.1mn (+18% y/y), but operating profitability will continue to be under pressure due to the high level of operating expenses, which will increase by 21% y/y (R&D depreciation + rising salary costs)
- A key event for the company's operations this year is the outcome of the EagleEye mission, which is planned to launch an observation satellite based on the HyperSat platform into LEO orbit. The mission is scheduled for launch at the turn of the first and second half of ‘24e (as part of the Transporter 11 launch - SpaceX's Falcon 9 rocket). Its positive result will allow the achievement of Technology Readiness Level 9 (TRL 9), making the product ready for commercialization.
