Peel Hunt has reiterated its 'buy' and 9p price target for Seeing Machines Ltd (AIM:SEE, OTC:SEEMF), though it does see some near-term challenges for the maker of driver monitoring systems used in 2.2 million cars worldwide.
Specifically, the company is faced with a retrenchment by end users of its technology as the automotive sector has been hit by rising costs, market uncertainty and supply chain issues.
"Ultimately, OEMs [manufacturers] dictate the speed of production, which in turn determines Seeing Machines' high-margin royalty income," Peel said in a note to clients.
"While increasing the proportion of cars with DMS might shield it from a drop in overall production numbers, we remain cautious that timelines could shift to the right."
The broker reckons Seeing Machines may have to make significant cost costs to hit its 2025 break-even target, which it reiterated early in results.
The shares were trading at 4p, a significant discount Peel's valuation, presumably underlining the long-term potential of the business.