In a note issued today, following Seeing Machines unaudited H1 results, house broker Stifel maintained expectations for the full year alongside its cash forecasts. 

Stifel analyst Peter McNally noted that H126 revenue was down 7.5% compared to the prior year period due to a decline in NRE revenue as “royalties ramp into GSR”.

“Operating losses (cash/adjusted EBITDA) have reduced c.24% to a range of $13.2-13.7m with cost reductions implemented last year having a positive effect. The company has a big second half ahead but should benefit from rising high margin Royalty revenue and a further ramp in Aftermarket which is expected to exceed 6k units in the current quarter. The company reached its goal of cash flow run-rate breakeven for the month of December, and we expect profitability in Q326 and Q426 ahead of the July regulatory deadline,” McNally explained.

He added: “Cash dropped to $3.4m at period end partially due to a $5.0m inventory build in working capital and $1.0m in deferred consideration but benefits from the $14.1m accelerated payment, post period.”

Pointing out: “Despite a 46% y/y increase in H126 royalty units, the royalty units ASP has remained above $9 ($9.01) declining by only 5% y/y and over H225 which is encouraging to see as large programmes launch and ramp ahead of GSR, as we saw in the recent KPIs.” This appears to be well above its main competitor Smart Eye, which declines to release this information.

Crucially, McNally stated (before this morning’s fall in price to around 3.2p): “We think investors should make the most of the current weakness. We maintain our target price at 10.5p. Buy.”

The writer holds stock in Seeing Machines.