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MIPS AB Q4´22 and Full Year Results
Date: February 9, 2023.
Stock Price SEK 498
Eloy Fernández Deep Research publishes equity reports periodically. All reports are subject to the following disclaimer.
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I own shares of MIPS AB.
I expected a soft quarter projecting SEK 130 M in sales for Q4 and SEK 588 M for the full year.
According to the management snow subcategory has grown around 85% in 2022. However, Sport sales have decreased by -10% for 2022, thus a substantial portion of Mips Q4 sales comes from Bike (Around 80%).
Moto and Safety increased by 34% and 33% for FY2022.
CFO amounted to SEK 236 M for FY 2022 (277).
Decrease of EBIT margin is due to investment in R&D, Marketing, and an impact in FX by SEK 11 M. R&D expense target around 5%.
Dividends 5.50 SEK per share.
Air Node was launched with Specialized at Tour de France. It is an after-market product.
Integra Split. Launched with world leading off-road brand FOX in August.
Integra TX was launched with Kabuto at the Motorcycle fair EICMA. Prepared for low and high impacts.
In 2022 MIPS launched its first Moto GP helmet and signed with Aleix Espargaró, a recognized Moto GP rider who competes in Aprilia Racing Team.
The Company strategy has three pillars:
Growth through existing business (Organic).
New channels and markets.
U.S. inventory vs Europe inventory
U.S. market dealers and retailers have accumulated more inventory than Europeans.
Management Team comments about inventory scenario: “Europe is more about consumer confidence”.
Only 10% of the Company addressable market of bike helmets are kids helmets because they are sold over 10-15 USD range.
If the company is focused in medium and high price product is a good sign in my opinion.
“We expect to remain soft into spring”.
“Around Q1 or Q2 we expect the market starts to normalize again”.
“We actually expect to start growing in bike again”.
“In 2024 Bike Market will be in balance again”.
In Q1 and Q2 bike sales decrease over total sales, being the main production Snow.
Growth in Moto because of:
New customers are created.
“Helmets that you are still allowed to sell but not allowed to produce which is under the EC2205 standard. They have been sold out on the market”.
In 2022 Mips announced their partnership with Delta Plus, head-to-toe equipment for work situation producer.
Delta Plus delivery is expected for end of Q1’23 or beginning of Q2’23.
According to the management team Delta Plus could sell around 200K helmets annually.
“Our investment in Safety is starting to pay off”.
“We have not seen a lot of competition in Safety, but I expect it”.
“A lot of construction helmets are produced outside China. We will follow that logic, so we will shift to whatever site is required”.
“Our plan in Safety is QoQ”.
According to the company revenues could reach SEK 2 B for 2027.
Sales growth around 30% after Bike sales are normalized.
Gross Margin targeting is around 70%.
EBIT Margin targeting is around 50%.
Stock price has increased by 31.36% since the analysis date. Upside is narrower now. However, valuation is a dynamic process, and the intrinsic value could increase or decrease if company fundamentals change.
Checking Bike category during the second half of 2023 and 2024 is a cornerstone for MIPS thesis.
Safety may be a strong driver of growth in the future.
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