Interims – Margins Expand, Net Result on Track
Equipmake (EQIP ASE)  designs and produces high performance electric motors, inverters, control software, battery management and pack technology for heavy transport, cars, aerospace, and marine. Today, the Company has reported Interim results for the 6 months ending November 2023 (1H 2024). Revenues, which grew by 97% to £2.1m, produced a positive gross margin of 9.2% (vs. negative 12.9% YoY) on product cost reduction that is now expected to see a significant increase in future margins. The adjusted operating loss widened to £3.0m (vs. £2.1m YoY) on operational investment to support growth. End cash closed at £3.9m. Although H1 revenues are tracking below our FY 2024 prior forecast of £13.4m, product cost reduction and increasing gross margins sees our FY 2024 revenue expectation reduced to £8.5m but loss expectation broadly unchanged. On increasing revenue and margin growth, we have raised our EBITDA positive estimate in FY 2026 from £1.5m to £2.0m.  

New Contracts Are Being Won  
Since May 2023, the contracted order book has grown from £5.5m to £11.2m as at January 17th 2024. The electrification of international bus networks is a major opportunity and EQIP offers its electrification technologies standalone or as complete systems for retrofit (“repower”) to existing vehicles. During 1H 2024 EQIP won new bus repower orders totalling £3.23m from Newport Transport for 8 buses and Big Bus Tours for 10 buses. An additional 10 were ordered post period end for £1.75m. 7 repowered buses were delivered to FirstGroup plc, increasing the in-service fleet to 12 vehicles. Trials are reported as progressing well and FirstGroup has entered a letter of intent that following a successful trial period, it may engage the Company for the conversion of several hundreds of vehicles. It is a significant opportunity.    

Recommendation and Target Price
Our revenue outlook has reduced, and we have a higher loss expectation in FY2025. However, balancing this, we see significantly widening opportunities from the U.S. and in Europe, expanding gross margins and have upgraded our EBITDA profit estimate for FY 2026. Our price target is unchanged. Despite the growing breadth of opportunity, the share price has pulled back 33% since August 2023 creating an opportunity, in our view. On a blended basis, we value EQIP at an EV of £111.9m and market capitalisation of £115.8m (given reported end cash of £3.9m for May 2023 end).

Buy. 12-month Target Price of 12.2 p/sh.