Edison Investment Research Limited
London, UK, 18 September 2020
Edison issues QuickView on Trackwise Designs (TWD)
Trackwise Designs has signed a three-year product manufacture and supply agreement with a UK electric vehicle OEM. The agreement is potentially worth up to £38m in total, subject to pricing revisions, and will generate up to £5.0m in revenues in FY21. This will be the first full series production of flexible circuits incorporating Trackwise's Improved Harness Technology (IHT). The agreement represents a step change in sales as total revenues for H120 were £2.4m, of which IHT was only £0.3m.
First half revenues, while up 55% y-o-y, imply a reduction in FY20 consensus estimates. Our peer multiples-based analysis shows Trackwise's shares trading towards the upper end of the range of year 2 P/E multiples for our sample of advanced printed circuit board manufacturers (mean is 13.6x, with CMK at 21.3x and KCE Electronics at 26.2x). This suggests that the shares would be fairly priced at current levels if Trackwise was merely another specialist printed circuit board (PCB) manufacturer rather than the inventor of a disruptive technology such as Ceres Power or Ilika. However, this approach fails to recognise the potential of the IHT business. We will explore the value ascribable to this activity in our initiation note following the publication of interims next week.
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