In our view, the recently announced capital raise reduces the financing risks and should give the company the runway to execute its order backlog and help convert parts of its sales pipeline, at least in the short term. Due to the overall structure of the raise, we expect it to succeed. With short-term funding soon secured, Metacon can again focus on executing its commercialization plans. After updating our valuation, with the assumption that the rights issue will be fully subscribed, we reiterate our Accumulate recommendation but lower our target price to SEK 0.23 per share (prev. SEK 0.40 per share), mostly due to higher-than-expected dilution.

Metacon’s outlook depends on sustained order flow

We believe that Metacon’s investment story relies on expectations related to the commercialization potential of the company's product portfolio and significant future business volumes. Metacon has already assembled a complementary product portfolio and successfully secured some large orders. In our view, Metacon’s main positive valuation drivers revolve around improving visibility into growth and future earnings. On a one-year horizon, we believe this will be driven by new order wins that will broaden and diversify the company’s revenue base. Over a horizon of multiple years, we see improving gross margins and operating profit as the next main valuation drivers.

Rights issue lowers short-term financing risks

The announced capital raising consists of a rights issue of approximately 109 MSEK, alongside a 35 MSEK convertible loan from Fenja, for total gross proceeds of up to ~144 MSEK (we estimate net proceeds of around 128 MSEK after guarantee fees and transaction costs). We view the raise positively, as it refinances the costly project financing and mitigates the short-term financing risks we had previously flagged. While the discount is relatively steep, we regard the overall terms as rather favorable versus what other companies at a similar stage have been able to secure. This, in combination with the ~71% covered by subscription commitments and guarantees, should help make the raise successful and give the company the runway to convert parts of its sales pipeline and demonstrate further commercial progress.

We keep our forecasts largely intact for now

Our estimates remain roughly unchanged, although finance expenses are adjusted somewhat lower. In the big picture, we estimate annual revenue growth to be steep at around 26%, rising from a low base to 1,549 MSEK+ in 2033, and the EBIT margin to strengthen from a loss-making investment phase to ~2% in 2027, approaching 11% in 2033. Our estimates assume that the rights issue will be fully subscribed, which should give the company the runway to execute its order backlog and help convert parts of its sales pipeline, at least in the short term. While Metacon should be able to deliver on additional small- and mid-sized orders, another large-scale order would likely increase financing needs, given the significant upfront capital that project execution requires.

We reiterate our Accumulate recommendation

In our view, the fair value of Metacon’s share under the current assumptions, including that the rights issue is completed in full, is around SEK 0.10-0.45 per share (prev. SEK 0.14-0.71 per share), which has been lowered since our last update mostly due to higher-than-expected dilution. With short-term funding soon in check, we believe that Metacon can refocus on executing its growth strategy. However, uncertainty remains regarding the company's ability to secure additional large orders on a consistent and profitable basis. Given these factors, we keep our target price roughly in the middle of our fair value range at SEK 0.23 per share. We still see an attractive risk/reward profile at current valuation levels, with expected returns exceeding our required return, and therefore we reiterate our Accumulate recommendation.