DRONE VOLT : Opinion change, from Buy to Add

The downgrade to our EPS FY22 reflects the kitchen sinking of the business associated with Aquiline amortization of all receivables, as well as 2/3rd of the Aquiline Drone shares (€1.7m), which led to a net result of -€26m far below our estimates (-€3.4m). Forward looking, our eps forecasts reflect breakeven at the Ebit level from 2024.

The drop in the NAV valuation comes mainly from writing down the value of the 10% stake in Aquiline to zero from €8.5m. We also assume that the 50% in Aerialtronics is likely to be worth 50% less than the valuation booked when 50% was sold to Aquiline. The distribution segment valuation has been raised to €21m.

The FCF has taken a hit as the FY 2022 confirmed that the Aquiline contract had in effect been cancelled to be (hopefully) replaced by a less ambitious commercial agreement. Still, the unexpected €20m+ order for the distribution segment will be a backstop for 2023. Distribution may become a driver for the coming years, along with the new business of Drone as a Service, which books record margins (80?).