AlphaValue Corporate Services
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Drone Volt

CR
Bloomberg   ALDRV FP
Aerosp. & Defence Equipt.  /  France  Web Site   |   Investors Relation
From distributor to service provider.
Target
Upside 103%
Price (€) 0.01
Market Cap (€M) 16.1
Perf. 1W: 2.22%
Perf. 1M: -3.16%
Perf. 3M: -17.9%
Perf Ytd: -8.00%
10 day relative perf. to stoxx600: 9.79%
20 day relative perf. to stoxx600: -8.49%
Earnings/sales releases20/10/2023

Ambivalent Q3 results

Drone Volt released a mixed Q3 trading update with sales below expectations due to supply tensions in the distribution business although a favourable revenue mix allowed the company to post a significant improvement in profitability. The company looks well on the way to achieving its doubling of sales objective for FY23 underpinned by strong dynamism for its new Drone Volt Expert offer.


Fact

• Sales declined by 23% compared to last year from €3.9m to €3.1m.
• DRONE VOLT FACTORY, SERVICES & ACADEMY was very dynamic with a 5-fold sales increase yoy from €0.09m to €0.51m. Distribution declined by 34% from €3.9m to €2.5m.
• The gross margin result increased by 27% from €0.56m to €0.71m, implying a 23% gross margin (Q3 22: 14%).
• Outlook confirmed for FY23


Analysis

Geopolitical side effects
Sales seem to be being affected by Chinese restrictions on commercial drone selling to Europe (DJI is the number one player in commercial drones with 70-90% market share depending on the studies) to avoid use on the Ukrainian battlefield. The tensions seem uneven, as the company had already logged sales of €1m during the first two weeks of October. However, the new Drone Volt Expert offer is very dynamic, supporting the firm’s target of doubling its revenue for the first nine months to €19m (9M 22: €8m).

Impressive profit margins
This higher proportion of value-added services in the revenue mix led to an improvement in profitability, with chunky gross margins for the new Drone Volt Expert offer, the whole DRONE VOLT FACTORY, SERVICES & ACADEMY division thus seeing a 61% gross margin compared to only 17% a year ago. The gross margin also improved slightly in the distribution activity from 14% to 15%, allowing the firm to report a 29% increase in gross profit to €2.5m (9M 22: €1.9m).

Good prospects for Q4 23 and beyond
The company is still aiming to double its sales in FY23 (already achieved in the first 9 months) despite the likely non-completion of its historical €20m distribution contract (still €7m to complete). Indeed, the company is present in many exhibitions to showcase its products and will notably present a new innovation for safety purposes called Drone Volt Kobra in November, representing a new growth opportunity for 2024.


Impact

We will adjust slightly our estimates for 2023 to take into account the new trend in sales and profitability.


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