Regulation and requirements from global authorities benefit Firefly. Authorities such as EU, ATEX, CSA, and SIL are all increasing the safety requirements companies must follow. Firefly’s systems are in line with those requirements. Thus, regulatory requirements for further safety protection is beneficial for Firefly.

Production on a larger scale increases the cost of production stops. As producers increase the rate of production, incentives to prevent or minimize the cost of production stops follows. Hence, Firefly’s fire protection systems can be a sufficient investment and a necessary need to reduce the risk of unwanted production stops, such as fire or dust explosions.

Firefly’s customers are exposed to highly cyclical factors. The customers cyclicality, via exposure to energy and raw material prices, affect their CAPEX, e.g. investments in safety systems. During 2016, low energy prices affected the bioenergy sector negatively, which led to less investments in Firefly’s system, reducing Firefly’s revenue by 5% for the year.

A decrease in top line growth decreases margins significantly. History has shown that a decrease in top line growth will decrease Firefly’s margins significantly. This is due to high fixed cost within the business. A decrease in sales by 5 % from 2015 – 2016 led to a decrease in EBIT-margin from 14 % to 3 %. Thus, it is important to keep a stable top line growth.

In a Base scenario, Firefly’s implied price per share with a target multiple of 15x EV/EBIT is 73 SEK. Firefly’s revenue is expected to grow 8 % CAGR until 2023, with an EBIT-margin of 8,7 % and an earnings margin of 5 %. Using a target multiple of 15x EV/EBIT, the target share price by 2023 is 73 SEK

Analysts: Lukas Olin & Christopher Sendelbach Gille

Firefly-Case