Gaussin

Our target price goes down following downgrades across the DCF, NAV and peer based valuations. Recent dilution has been a major factor in this and, given that Gaussin will require funding to scale up manufacturing, future equity dilution cannot be ruled out and hence remains a key risk to consider.

We have updated our share count forecasts for the company following the drawing of an equity line converting into 7m new shares. Additionally, we have also updated our operational forecasts for the company following the release of its first semester figures. Based on these figures we now expect profitability to be lower than initially expected and that improving margins will now take longer. The reasons for this are the slower ramp-up of current production and ongoing raw material inflation. Consequently, we have cut our 2023 EBITDA forecast from €20.9m to €2.5m and 2024 EBITDA from €28.7m to €6.2m.

While we haven't materially updated our valuation of the assets within the company, the bulk of the revision in our NAV comes from the higher share count as Gaussin resorts to equity line financing. Moreover, with Gaussin aiming to scale up its production, the immediate need for working capital and capex will lead to an increase in net debt by c.€10m. This accounts for the remainder of the revision in our NAV.

Our DCF valuation comes down due to three reasons. Firstly, our reduced profitability forecasts which result in lower FCF. Secondly, a change in the revenue and EBITDA growth rate in the out years from 8% to 5.5%. And thirdly, the dilution coming from a higher share count.