A Beacon of Growth in the Telecommunications Sector, Zeus Capital Comment
In the latest trading update, CyanConnode Holdings plc (LON:CYAN), a leading provider in smart metering solutions, has demonstrated an exceptional performance that surpasses expectations, highlighting its pivotal role in the smart energy sector.
Exceptional Revenue Growth and Financial Stability
CyanConnode’s financial year 2024 (FY24) saw a significant leap in revenue, surpassing the consensus expectations of £16.1 million. This growth was primarily driven by a 2.5-fold increase in module deliveries, underscoring the company’s effective implementation of smart metering orders in India’s Revamped Distribution Sector Scheme (RDSS). The company’s strong performance is further bolstered by a 58% year-over-year increase in cash receipts, totalling £16.9 million. This robust cash flow enhances the company’s net cash position, fostering a stable financial base for continued growth and innovation.
A Bright Outlook with Strategic Expansions
Looking ahead to FY25, CyanConnode is well-positioned with approximately 80% of its revenue expectations already covered by current backlog orders. This confidence is supported by the successful delivery of 2.8 million units and the receipt of approximately 6.6 million orders to date, predominantly from India. Furthermore, the company’s strategic decision to establish a new office in the United Arab Emirates expands its geographical footprint, promising to tap into the lucrative Middle East and North Africa markets.
Valuation and Investment Potential
Despite its impressive growth trajectory and solid backlog, CyanConnode’s stock remains undervalued at 5.7x FY25 EV/EBITDA. This discrepancy presents a unique opportunity for investors seeking to capitalise on the company’s future potential, particularly as CyanConnode continues to secure new contracts and expand its market reach. The company’s high win-ratio in India, approximately 25% in terms of volumes, positions it favourably for future growth as it captures a significant share of the market under India’s RDSS, which targets sanctioning 250 million meters by March 2025.
Bob Liao, Analyst at Zeus Capital said, “Our FY24 forecasts will be upgraded once the Group’s audit has been finalised and we have clarity on the extent of the material outperformance of revenue. An increase in revenue has the potential to drop through to a greater proportional increase in profit. For FY25, we reiterate our forecast for revenue to jump to £34.5m with Adjusted EBITDA of £4.4m (12.9% margin).”
CyanConnode Holdings stands out as a robust growth entity within the telecommunications equipment sector, driven by strategic initiatives and strong operational performance. The company’s forward-looking strategies and successful execution of its business model not only promise substantial returns but also reinforce its standing as a leader in the smart metering industry. For investors and stakeholders alike, CyanConnode represents a promising potential for investment, marked by technological innovation and strategic market expansion.
