We increase our EBITDA forecast for the company for the 2022-2024E period following a batch of new contracts signed by the company. The company inked contracts with PGE (PLN 22m), Tauron (EUR 10.6m), as well as smaller ones with Swietokrzyskie Mines (SKSM) and a Poznan hospital. Though these contracts encompass only the delivery of simple PV panels, we still believe they may bring small double-digit EBITDA margins for ML System. The company managed also to get some international contracts in Romania, the Netherlands and Scandinavia. We also believe the company is likely to show initial revenues stemming from new product lines (2D and Quantum Glass) already in 2Q22 results. We expect the company to report 2Q22 EBITDA at the level of PLN 9.0m, +5.9%y/y and 68.1%q/q. The larger impact of the new contracts signed recently will be visible in 2H22, as for instance the Tauron contract needs to be finalized by the end of the year. PGE’s contract runs until 03.07.2023. All in all, we increase our EBITDA forecast for the 2022-2024E period by 9.3%, 10.1% and 7.8%, respectively, to PLN 41.2m (up 69.0%y/y) in 2022E, PLN 68.3m (up 65.9%y/y) in 2023E and PLN 97.6m (up 42.9%y/y) in 2024E, with the upward trajectory stemming from a rising backlog, and production coming from Quantum, 2D and Active Glass product lines all supported by subsidies. We increase our FV by 14.9% to PLN 104.48 and maintain our BUY recommendation.
Tauron contract: ML System has concluded a contract with Tauron Serwis for the supply of photovoltaic panels for the construction of a farm with an installed capacity of 37.1 MW in Mysłowice-Dziećkowice, currently the largest photovoltaic farm under construction in Poland. The total value of the contract is EUR 10.61m. As Tauron reported, the photovoltaic farm will be built in two stages: in the first one, about 37 MW will be put into operation, the second in turn provides for the construction of an installation with a capacity of about 60 MW (a total of nearly 100 MW). Ultimately, photovoltaic modules with a total area of 16 ha will be installed in Mysłowice, which corresponds to as many as 22 football pitches. Tauron estimates that during the year the installation will produce 39,000 MWh of green energy, which corresponds to the annual needs of 16,000 households, while reducing CO2 emissions by almost 30,000 tons.
PGE contract: The company signed a PLN 22m contract for the design and construction of the Pasterzowice photovoltaic installation with a capacity of up to 8 MW, implemented for PGE Energia Odnawialna. The contract is to be completed by 3 July 2023.
2Q22 results preview: We conservatively assume revenues to reach PLN 55.7m, +20.8% y/y and 1.5% q/q in 2Q22. We expect the company’s EBITDA to arrive at PLN 9.0m, +5.9% y/y and 68.1% q/q driven by the first revenues coming from the 2D and Quantum Glass business lines. We expect the bottom line to swing into a small profit of PLN 0.9m, -77%y/y, down from the high base last year.
ML System
BUY
FV PLN 104.48
37.9% upside
Price as of 25 August 2022 PLN 75.75
Recommendation maintained
Analyst: Robert Maj robert.maj@ipopema.pl
