Seeing Machines Gen 3 Guardian fitted into first commercial vehicle manufacturer

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Seeing Machines has confirmed that its recently launched Guardian Gen 3 AI-powered Driver Monitoring System (DMS) has been successfully fitted into Wrightbus and achieved ā€˜homologationā€™, the formal process of being approved and certified for use.

In a note issued today by house broker Stifel, its analyst Peter McNally explained that the actual contract with the Northern Irish bus manufacturer is likely to be worth Ā£0.8m-1.5m per year to Seeing Machines at full production.

While thatā€™s not huge, the real significance of this news is that it paves the way for further approvals from bus and truck manufacturers. For example, Seeing Machines revealed that 3 other OEMs are currently going through the approval process, which McNally noted: ā€œindicates that the company has won another customer since the last updateā€.

OEMs Future Proofing

McNally also reiterated a point that has been ignored/misunderstood by many investors; some manufacturers will increasingly seek to future-proof their commercial vehicles by installing advanced DMS, to be ready for the introduction of more stringent regulations in Europe that come into effect in 2026. 

Hereā€™s how he explained it in his note: 

ā€œOn 7 July, two key regulatory changes to Europe’s GSR came into effect:
(1) Driver Drowsiness and Attention Warning (DDAW): DDAW, which requires driver monitoring systems for signs of drowsiness, is as of 7 July mandatory for all new road vehicles sold. While the regulation does not appear to require advanced DMS, allowing a wider scope of solutions, we would expect the change to increase demand for DMS, with Seeing Machines’ products a market- leading option for OEMs now necessitated to at least provide monitoring for drowsiness. However, this can also be provided by steering wheel torsion.

(2) Advanced Driver Distraction Warning (ADDW): A more stringent standard requiring direct or camera-based DMS to detect driver distraction, ADDW points more directly towards Seeing Machines’ offerings. As of 7 July, this is mandatory for all new ‘types’ of registered vehicles, but we shall have to wait two years before it is mandatory for all new vehicles sold. However, for customers installing DMS in the short term to meet the DDAW regulation, there is now an incentive to future- proof vehicles for when ADDW fully comes into effect in 2026, with the Guardian 3 a market-leading option.ā€

Itā€™s therefore a no brainer that the more proactive, safety-conscious, OEMs are going to accelerate the process of installing advanced, camera-based DMS. With its technological lead further buttressed by leadership in gaining regulatory approval and certification for use by commercial vehicle manufacturers Seeing Machines should take a very healthy chunk of the market in Europe.

Massive market in Europe

The scale of this regulation-driven opportunity is huge as McNally conveyed with some stats: ā€œThe European Automobile Manufacturersā€™ Association (ACEA), which ‘unites’ Europeā€™s 15 major car, truck, van and bus makers, stated that European bus production rose 19% to 33k vehicles in 2023. In addition, commercial truck production rose 16% to 347k. For comparison, Seeing Machines reported a total of 14.8k hardware units sold in FY23 which produced $14.5m in revenue from hardware and installations.ā€

McNally reiterated his investment case for Seeing Machines with ā€˜BUYā€™ recommendation and a 13p price target. ā€œWe continue to think that Seeing Machines is leading the DMS market. At current levels, the shares trade at 4.0x FY24E EV/sales or 3.3x FY25E, which we think is attractive for a market leader in a large industry with a three-year forecast revenue CAGR of 27% or 42% for gross profit through FY26E.ā€

Personally, Iā€™m expecting upgrades this financial year as Seeing Machines market leadership in Aftermarket and Auto (never mind Aviation) becomes glaringly obvious and profitability is achieved.

The writer holds stock in Seeing Machines

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