The new Seeing Machines Ltd (AIM:SEE, OTC:SEEMF) driver monitoring system (DMS) launched today is significant for the company, say analysts at Stifel, as it provides a feature-rich product at a much lower production cost "and can therefore catalyse revenues in this division".
A 'buy' rating was reiterated along with a share price target of 15p, versus the last closing price in London of 5.32p.
Launched at the CES 2024 in Las Vegas today, the third generation of the Guardian after-market DMS product is ideally suited for fleet vehicles, the analysts noted.
"With the release of this product, we believe Seeing Machines is well positioned to take market share in after-market DMS as the production cost is significantly reduced," they added, based on calculations that the unit cost of the Gen 3 product is 40% of the previous model.
"We think this provides a significant advantage over competitors and allows the company to price its product at a more competitive rate and make a profit, while improving gross margins."
The ability to scale up the product is also improved, the analysts said, as a more capital-light manufacturing model eliminates the need for component inventory, thereby reducing production time and freeing up capital in the cash conversion cycle.
While Stifel thinks the third-generation Guardian product could help accelerate progress in the after-market division, it is not making any changes to forecasts yet.
The investment bank's target price is based on discounted cash flow analysis and a 10% weighted average cost of capital.
At current levels, the shares trade at 4.5 times 2024 forecast sales or 3.4 times 2025 estimates, which the bank's analysts said they think "is attractive for a market leader in a large industry with a 3-year forecast revenue CAGR of 29% or 45% for gross profit through FY26E".