MATELAN Research - ISRA VISION AG

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ISRA VISION In-Depth Report Full year forecasts still conservative ... Order backlog further increases to ‘significantly above EUR40m’ Highest order entry from industries that appear to be more difficult - 34 - Segment reporting Industrial Automation Surface Vision Q3 10/11 Q3 09/10 % change Q3 10/11 Q3 09/10 % change Net sales 2.98 2.37 25.8% 16.04 13.72 16.9% EBIT 0.43 0.03 1600.0% 2.97 2.79 6.5% Source: ISRA VISION, in EURm The following chart illustrates that our full year estimates are still conservative although we have raised our forecasts. In fact, the company just needs to grow by 8% in the fourth quarter to reach our full year estimate, following a plus of 19% in the first nine month. On the margin side, the company showed some deterioration last year in the fourth quarter compared to the nine-month period. This year, we expect a stable development due to the better market situation and the finalization of the Graphikon acquisition. Sales and margins 60 50 40 30 20 10 0 9M Q4e Sales 09/10 Sales 10/11 EBIT margin 09/10 EBIT margin 10/11 Source: ISRA VISION (reported figures), MATELAN Research (estimates for Q4 10/11), margins shown as percentage of sales (not total output), in EURm This view is supported by a strong order backlog, which came in at ‘significantly above EUR40m’ after ‘above EUR40m’ at the end of Q2. This suggests that order entry still exceeds billing. We would translate management’s statement into approximately EUR44m, i.e. showing a q-o-q increase of 10% in the backlog. Most importantly, the order book covers the sales expected for the fourth quarter almost twice, thus building already a strong base for the coming year. The following graph shows the development of sales and orders in the course of the year. In fact, we even expect the order book to increase slightly by the end of the financial year, which means that more than half of our sales estimate for the coming year would already be in the book. Segment-wise, mgmt stated that order entry in the third quarter was highest in the industrial automation unit (>50%, even excluding the framework agreement announced recently), though from a relative low base. In the surface vision business, demand from glass, plastics and paper industry was highest. Mgmt stated that the dynamic of the order entry at present remains high and that it cannot see any signs of a cooling down yet. 30% 25% 20% 15% 10% 5% 0%
ISRA VISION In-Depth Report Order entry still accelerating FY outlook confirmed – double-digit growth expected for coming year - 35 - Order development and sales 60 50 40 30 20 10 0 Source: ISRA VISION (reported figures), MATELAN Research Region-wise, most orders come from Europe (+51%) but the growth of order entry again is highest from the Americas (+60%). Thereby, both regions experience a further acceleration from the Q2 level. Most importantly, we are looking at growth rates in the order development that largely outstrip our sales forecasts, which further indicates that there might be some potential for upward revisions in our model. Order entry growth by region 70% 60% 50% 40% 30% 20% 10% 0% Source: ISRA VISION Q1 HY 9M FY Sales 09/10 Sales 10/11 Order intake Order book Europe Americas Asia Against the background of the strong third quarter and the positive indications going forward, management has confirmed its full year targets of ‘double digit revenue growth to significantly more than EUR70m’ and ‘improving margins’. In view of the strong order development, management has even indicated that sales in the coming year should grow at a double-digit rate, irrespective of a potential economic slowdown. The late cyclical nature of the MV market and ISRA’s new products should in our view help in this respect.
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MATELAN Research - ISRA VISION AG

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