Acceleration, and revenue uplift for FY24 and beyond

CyanConnode is currently involved in Indian tenders for more than 100m meter endpoints, and its partners have already secured L1 preferred bidder status for c.30m incremental meters. In addition to the 2.3m orders won in the fiscal year to date, CyanConnode has entered into a framework agreement with a partner to supply hardware and software for 3m endpoints for future contract awards under the Indian smart meter programme. Our revised forecasts represent an initial step towards reflecting the prospective upside in financial performance. Our updated DCF analysis suggests an implied fair equity value of £96.8m.

• Phase 1 of the Indian programme is well-advanced: Of the total smart meter rollout of 250m meters, 100m were identified as higher priority. CyanConnode’s latest update confirms that tenders for c.100m meters are currently in process, compared with c.62m in November 2022.
• Acceleration: The win rate in FY23 to date has been 38%, including the order for c.1m nodes announced in January 2023. CyanConnode’s partners have achieved L1 status for c.30m meter endpoints. Even a 20% overall win rate would imply revenue far beyond our revised estimates.
• Silicon Labs highlights partnership: Silicon Labs is a major US vendor in the semiconductor market, and it recently highlighted its partnership with CyanConnode, which is using the FG25 module and leading the market regarding meeting Indian technical requirements for RF, such as Wi-Sun.
• Recent fundraise creates working capital cushion: The January 2023 oversubscribed raise brought in £5.25m gross proceeds at £0.17 per share. The funds are largely for expansion of inventory and production capacity, necessitated by an accelerating pace of contract awards.
• Investment summary: From the outset, CyanConnode has positioned itself as a neutral technology vendor able to partner with any meter manufacturer or prime contractor. This approach has yielded an array of partnerships, which are now paying off in terms of breadth of exposure to current tenders across India. Our updated DCF-implied fair equity value for CyanConnode is £96.8m (£0.36 per share).