Amid growing interest from governments around the world in smart technologies, CyanConnode is establishing its presence as a leading global vendor of intelligent communications and metering technologies that capture information and facilitate the flow of data for analysis. Its Omnimesh platform, developed at a total cost of over $50m, has proven scalability and is being widely deployed in large-scale utility smart meter rollouts in countries such as India and Thailand, but can be applied to streetlights, heating and EV charging systems. Given positive secular trends, the long-term growth outlook would appear to be highly favourable.
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- Smart meter rollouts a global priority: Governments globally are sponsoring smart meter deployments. In many countries, utilities are struggling, due partly to the loss of as much as 20% of their revenue from theft of power and unpaid power bills. Reducing this leakage allows essential investment in infrastructure.
- CyanConnode well placed in India: India’s Smart Meter National Programme (SMNP) is gaining momentum, with an objective to replace over 250 million conventional meters by 2022-23. CyanConnode has won, and successfully deployed, several contracts and is well placed to capture significant share.
- Strong revenue confirmed in FY’21 update: The 7 April update confirmed strong revenue growth of c.250% to c.£6.4m during the 15-month period to end-March 2020. Management is guiding to further strong growth in FY’22, highlighting the consensus revenue estimate of c.£8.8m.
- Strong pipeline: Our forecasts for FY’21 and FY’22 include primarily only existing contracts where meter rollouts have commenced. However, the pipeline is substantial, not only in India, but also in Thailand, the UAE, Africa and Egypt – these opportunities are not material to our estimates until FY’23.
- Investment summary: Rollouts of smart meters for major programmes are firmly under way, and the company is ramping up production to meet demand. The smart meter opportunity is just one aspect of the medium-term addressable market, which also includes smart cities. Our DCF-implied equity fair value is £71.8m (equating to £0.38 per share), versus the current market capitalisation of £11.8m.