One of the most important lessons I’ve learnt as an investor is that "patience equals profit", especially when it comes to the adoption of breakthrough technology, a process that doesn't always happen in a linear fashion.
Take electric vehicles (EVs), where even industry leader Tesla is experiencing growing pains. The good news is that like the internet 20 years ago, EVs are coming, and those first movers who seize the initiative should ultimately generate the highest returns.
The same is true for Saietta Electric Drive (SED), a revolutionary new eDrive/eMotor systems developer shaking up the rapidly expanding electric 2-3 wheeler market.
This morning the company said that its Indian supply chain was "on track" to start mass production of its proprietary eDrives by Septembe 2023, and on the way to hit delivery targets of 80,000 units over the next 5 years for one of the largest motor bike OEMs in India. £986k worth of purchase orders for the contract have already been received, with the remaining £2.2m balance scheduled for 2024.
The company also has a further 11 OEMs in the pipeline at various stages from request for quote, right through to final selection. All told, the group is now targeting a total addressable market of around 2m units by FY28. Clearly this part of the business is powering ahead.
And with £11m of cash in the bank as at February 2023, Saietta should have sufficient capital to fund its growth until becoming cashflow breakeven in FY25. To make sure it has, it is sensibly cutting its cloth on costs relating to its factory and R&D centre, and has similarly time-shifted the commercialisation of its ConMet US truck/trailer business and marine unit - which has been experiencing supply chain difficulties - to the right.
So how does this impact the numbers?
Well, today broker Canaccord reset the bar and reduced its revenue forecasts to £6.0m (vs £4.3m last year), £12.1m and £36.0m respectively across the next 3 years. That's expected to generate an adjusted EBITDA of £12.0m by FY25 (from an estimated -£10.2m FY23), alongside a trough net cash position of £2m and a 120p a share price target (reduced from 285p previously), up from the current 28p/£29m market cap.
In terms of execution, CEO Wicher Kist said the company will now “focus primarily on strategic business development, particularly with the objective of accelerating the development of the Propel marine division.”
Executive Chairman Tony Gott commented :"Saietta Electric Drive’s light-duty integrated eDrives business is developing at a greater scale & faster pace than originally envisaged. Meeting customer demands for volume mass production in Q3’23 in order to allow the associated vehicle platforms to be launched in Q1’24 has become an absolute priority. While the Board is confident that it has the technical and financial resources to meet this goal, it is also cognisant that it remains a challenging task and has resolved to make all necessary refinements to its strategy to ensure its achievement without recourse for further external fundraising.”
Rome wasn't built in a day’, yet equally the end result was magnificent.