OptiCept Q1’24 preview: Key partnerships in focus

OptiCept will release its Q1 results on Thursday. In the report, we are particularly interested in updates on the company's new strategic focus on solid foods, ongoing evaluations in both business areas, and progress in the PlantTech segment. Additionally, we are keeping an eye on PlantTech’s revenue growth and the development of the company's cash position. 

Modest revenue growth

We anticipate OptiCept's Q1 revenue to increase by 7% year-on-year to 5.3 MSEK. The revenue is expected to be approximately evenly distributed across the business areas. The FoodTech’s revenue growth is expected to be driven by the FPS order of around 2.4 MSEK announced in late January. In the PlantTech segment, growth is likely driven by higher volumes within the cut flowers segment, benefiting from seasonal effects as many roses are sold for Valentine's Day. In addition, we believe the cooperations within cuttings may stimulate growth since the machines were shipped to customers in late 2023 and this would be a positive sign of the progress of the cooperation. We expect the order book to remain at a high level around 25-30 MSEK, due to the low conversion rate from order book to revenue, primarily because a significant portion of the total order book is tied to OliveCept systems.

In the bigger picture, however, OptiCept’s investment story is based on long-term commercial success, so we do not place too much emphasis on reported revenue in a single quarter. Instead, we believe it is important to keep an eye on the progress of key partnerships that can help bring in large orders and later convert them into deliveries and revenue.

Decreased operating loss but cash is still being consumed

OptiCept’s Q1 profitability remains negative on all lines, with our EBITDA and EBIT estimates at -4.3 MSEK and -9.7 MSEK, respectively. The company’s cash position at the end of Q4’23 was some 14 MSEK, which was later strengthened by around 10 MSEK due to the directed issue to FPS. Overall, the cash position would amount to around 8-12 MSEK at the end of March, given the company’s operating burn rate in the previous quarter of around 5 MSEK/month. However, we expect a lower burn rate compared to Q4’23 due to higher revenue and lower operating costs, as the cost base in Q4 was affected by heightened activity related to OliveCept installations. However, we still believe that OptiCept will require additional financing around Q2/Q3’24 and thus we seek any comments regarding the company’s outlook on financing needs.

Progress of key partnerships determines the direction in the near future

In 2023, OptiCept updated its strategy to focus on strategic partnerships with established global companies to reduce costs and accelerate commercialization. In the FoodTech segment, the company collaborates with FPS for solid foods and Dole for liquid foods, while in the PlantTech segment, partnerships include BCC, NorthMerge, and Guangxi for cuttings. The company is also seeking a partner for OptiBoost Inside in cut flowers. Further details on these projects and the funding outlook are critical to the report and the company's business growth outlook. We also look forward to comments on the existing commercial agreements for OptiCept within PlantTech.

In our view, OptiCept’s investment case and valuation relies on improving visibility on revenue growth, and clear signs on both increasing order intake and order book conversion to revenue would be important drivers of improving this visibility.