I’m not a professional and I’m not recommending anything. Just sharing my thoughts.

General:

Mips is a company specializing on brainprotection for helmets. The company is world leading and started its research phase at 1996, had their first prototype ready 2000. Year 2015, over 1 million helmets had the mips technology implemented and 2017 they got listed on Nasdaq.

The technique purpose is to reduce rotational forces to the head and brain during impact by reducing friction between head and helmet. This is reducing the risk of brain tissue stretching that would normally lead to brain damages during impact. Mips got around 300 patents and the components production is outsourced to another company in Shenzhen, China (90%). This is associated with risk, but pretty much all helmet producer share the same geographical risk since most helmets are produced in this region. The helmets are easy to recognize in the stores, they all have a yellow sticker and the salesmans are well aware of the benefits of using this kind of helmet.

Mips have a total adressable market of 410 million helmets, with their newly entered market, safetyhelmets consists of 310 million helmets. The focus market as of know consists of 130 million helmets of wich they still only have a 10% market share!

Business model:

Mips businessmodel is built on royalties from other helmet manifacturers. The helmets are in a price range with a minimum price of 150 SEK ($15) into 3 different segments, bycicle, sport and safety (industrial and law enforcement) helmets. It’s a cheap insurance that everyone should be having and I believe that if they would need to increase the prices, the company would not feel any negative effects from that. Those who already uses helmets will continue to do so regardless and in the other segments, motorcycle, riding, teamsport or industry there are laws forcing users to have helmets.

Recently Mips have benefited from law changes in 2020 when a test-standard for motorcycle helmet producers came through from Federacion indernationale motorcyclisme. The tests forces producers to do tests on rotational forces on impact. There have been discussions about implementing similar standards in other sports and practices too, but we will have to wait more for that.

Bike helmets have always been the main business. The safety helmets is a new segment that got added 2019 and still haven’t had a big success. The reason seems to be the long process to get a contract with bigger manufacturers. However, in april 2022 they announced a collaboration with Uvex who is one of the biggest producers globally for safety equipment (revenues of €534M during fiscal year 20/21). How this will effect Mips is something we have to wait and see, but recent comments from Mips have been that they want to ramp up and reach bigger volumes in this segments some time during 2022.

In november they launched a virtual testlab that lets helm designers test their models on a computer before doing it physically. This means that a test-simulation only takes 10 days to complete instead of the previous 50 days. Totally there have been 50 000 tests (according to the news report 2021).

Mips have through the years been competitive. Year 2021, 12 million helmets with Mips tech got sold, the year before it was 7,2million. Third-part tests have been done. Mips bike helmets are considerably better than the competitors, in the top 10, 9 of the helmets using Mips. Top 10 in snowboarding have 5.

Full list: https://helmet.beam.vt.edu/bicycle-helmet-ratings.html

There are a few competitors but they are small and limited. They promise more than they can provide as of know. Last time I heard about a bigger threat was when Trek and Bontragers new helmets 2019 was provided with a newly made material called WaveCel that was supposed to be 48x better than a traditional helmet and 3-12x better than Mips. WaveCels tests was then proved to be insufficient. Hövding is another competitor but they have an airbag solution but it’s not really popular, either it’s because it’s not convenient, the price of 300€ is to much or because people don’t trust that kind of technology yet. It also needs to be charged to use (alot of people seem to have battery problems too), you also need to put it in idle to not activate when not being on the bike. According to insurance company Folksam, it’s not a helmet to trust. 2020 It got a “trusted”-grade by Folksam but have since then been removed (while all Mips helmet tested got a good grade).

Competition is not on the same lever yet.

Another competitor entering the research phase is public swedish company Autoliv (7 billion SEK market cap, making safetysystems for cars) together with helmet manufacturer POC to make a helmet with a airbag solution also. However, this one is going to try to apply Mips businessmodel instead of Hövdings and as mentioned is just in the research state.

Financials

The debt of the company is non-existent.  They can really decide to pay of their debts whenever they want. They have a cash account of 98M SEK and total debts of 106M. They are not capital intensive either. The operating cash flow the last 2 years have been 277M SEK (116M SEK) with cash flow in investing staying at low -11M SEK (-15M SEK) that contributes to a strong free cash flow. Top-line CAGR is at 27% between 2016-2021. Gross margins at around 75% and G&A and R&D to sales getting lower and lower for every year. EBIT margin 2021 was at 53% with a net margin of 41%. Q1 2022 have also shown strong sales with a revenue growth of 65%.

Also, notice the ROIC the last years. Worth mentioning that Mips had problems growing during corona mainly due to lack of components at the helmet factories. There is a big order backlog with accounts receivables to sales beeing at 1,24 wich is very high considering that they have been between 0,25 to 0,35 the last 5 years.

According to my own calculation, Mips is making around 21 SEK ($2,1) per helmet sold on average (97% of revenue is sales of helmets, 3% is services). With those numbers, the sales could theoretically look something like this (unless the focusmarket is NOT getting bigger, wich it acutally should)

Right now they are still scaling up the business at fast pace. Capex very low in comparison to opex. I guess they are at a point soon where they will need the money to either buy a company or share the profits with the shareholders in other ways. Going forward Mips have a goal of 2027 reach revenues of 2B SEK, operating results (EBITDA)-margins at 50% and pay out a dividend of 50% of net income.

Valuation

Of course the companies strong financial status and big potential for growth have effected the valuation of the company alot. Market cap is currently at 12 Billion SEK with a P/E of 47. Even though there have been a massive fall of 60% from the top. Based on Mips own goals of 2 billion in revenues and my belief that they will keep a net margin of 40%. This would mean a 800M SEK bottomline. A P/E at 12-15 would give is a market capo f between 9,6B – 12B SEK. Wich is a stock price of 362 SEK to 452 SEK year 2027. However, I am optimistic that they will be able to reach revenues greater than that and also to be valued at levels higher than what I expect, but with that a bigger market share, merger&acquisitions and new markets and sacrificing short term earnings would be needed.

Catalyst

-          Scaling up safety segment (industry/law enforcement)

-          Bigger market share of focus area

-          Merger & acqusition

I’m not a professional and I’m not recommending anything. Just sharing my thoughts.

General:

Mips is a company specializing on brainprotection for helmets. The company is world leading and started its research phase at 1996, had their first prototype ready 2000. Year 2015, over 1 million helmets had the mips technology implemented and 2017 they got listed on Nasdaq.

The technique purpose is to reduce rotational forces to the head and brain during impact by reducing friction between head and helmet. This is reducing the risk of brain tissue stretching that would normally lead to brain damages during impact. Mips got around 300 patents and the components production is outsourced to another company in Shenzhen, China (90%). This is associated with risk, but pretty much all helmet producer share the same geographical risk since most helmets are produced in this region. The helmets are easy to recognize in the stores, they all have a yellow sticker and the salesmans are well aware of the benefits of using this kind of helmet.

Mips have a total adressable market of 410 million helmets, with their newly entered market, safetyhelmets consists of 310 million helmets. The focus market as of know consists of 130 million helmets of wich they still only have a 10% market share!

Business model:

Mips businessmodel is built on royalties from other helmet manifacturers. The helmets are in a price range with a minimum price of 150 SEK ($15) into 3 different segments, bycicle, sport and safety (industrial and law enforcement) helmets. It’s a cheap insurance that everyone should be having and I believe that if they would need to increase the prices, the company would not feel any negative effects from that. Those who already uses helmets will continue to do so regardless and in the other segments, motorcycle, riding, teamsport or industry there are laws forcing users to have helmets.

Recently Mips have benefited from law changes in 2020 when a test-standard for motorcycle helmet producers came through from Federacion indernationale motorcyclisme. The tests forces producers to do tests on rotational forces on impact. There have been discussions about implementing similar standards in other sports and practices too, but we will have to wait more for that.

Bike helmets have always been the main business. The safety helmets is a new segment that got added 2019 and still haven’t had a big success. The reason seems to be the long process to get a contract with bigger manufacturers. However, in april 2022 they announced a collaboration with Uvex who is one of the biggest producers globally for safety equipment (revenues of €534M during fiscal year 20/21). How this will effect Mips is something we have to wait and see, but recent comments from Mips have been that they want to ramp up and reach bigger volumes in this segments some time during 2022.

In november they launched a virtual testlab that lets helm designers test their models on a computer before doing it physically. This means that a test-simulation only takes 10 days to complete instead of the previous 50 days. Totally there have been 50 000 tests (according to the news report 2021).

Mips have through the years been competitive. Year 2021, 12 million helmets with Mips tech got sold, the year before it was 7,2million. Third-part tests have been done. Mips bike helmets are considerably better than the competitors, in the top 10, 9 of the helmets using Mips. Top 10 in snowboarding have 5.

Full list: https://helmet.beam.vt.edu/bicycle-helmet-ratings.html

There are a few competitors but they are small and limited. They promise more than they can provide as of know. Last time I heard about a bigger threat was when Trek and Bontragers new helmets 2019 was provided with a newly made material called WaveCel that was supposed to be 48x better than a traditional helmet and 3-12x better than Mips. WaveCels tests was then proved to be insufficient. Hövding is another competitor but they have an airbag solution but it’s not really popular, either it’s because it’s not convenient, the price of 300€ is to much or because people don’t trust that kind of technology yet. It also needs to be charged to use (alot of people seem to have battery problems too), you also need to put it in idle to not activate when not being on the bike. According to insurance company Folksam, it’s not a helmet to trust. 2020 It got a “trusted”-grade by Folksam but have since then been removed (while all Mips helmet tested got a good grade).

Competition is not on the same lever yet.

Another competitor entering the research phase is public swedish company Autoliv (7 billion SEK market cap, making safetysystems for cars) together with helmet manufacturer POC to make a helmet with a airbag solution also. However, this one is going to try to apply Mips businessmodel instead of Hövdings and as mentioned is just in the research state.

Financials

The debt of the company is non-existent.  They can really decide to pay of their debts whenever they want. They have a cash account of 98M SEK and total debts of 106M. They are not capital intensive either. The operating cash flow the last 2 years have been 277M SEK (116M SEK) with cash flow in investing staying at low -11M SEK (-15M SEK) that contributes to a strong free cash flow. Top-line CAGR is at 27% between 2016-2021. Gross margins at around 75% and G&A and R&D to sales getting lower and lower for every year. EBIT margin 2021 was at 53% with a net margin of 41%. Q1 2022 have also shown strong sales with a revenue growth of 65%.

Also, notice the ROIC the last years. Worth mentioning that Mips had problems growing during corona mainly due to lack of components at the helmet factories. There is a big order backlog with accounts receivables to sales beeing at 1,24 wich is very high considering that they have been between 0,25 to 0,35 the last 5 years.

According to my own calculation, Mips is making around 21 SEK ($2,1) per helmet sold on average (97% of revenue is sales of helmets, 3% is services). With those numbers, the sales could theoretically look something like this (unless the focusmarket is NOT getting bigger, wich it acutally should)

Right now they are still scaling up the business at fast pace. Capex very low in comparison to opex. I guess they are at a point soon where they will need the money to either buy a company or share the profits with the shareholders in other ways. Going forward Mips have a goal of 2027 reach revenues of 2B SEK, operating results (EBITDA)-margins at 50% and pay out a dividend of 50% of net income.

Valuation

Of course the companies strong financial status and big potential for growth have effected the valuation of the company alot. Market cap is currently at 12 Billion SEK with a P/E of 47. Even though there have been a massive fall of 60% from the top. Based on Mips own goals of 2 billion in revenues and my belief that they will keep a net margin of 40%. This would mean a 800M SEK bottomline. A P/E at 12-15 would give is a market capo f between 9,6B – 12B SEK. Wich is a stock price of 362 SEK to 452 SEK year 2027. However, I am optimistic that they will be able to reach revenues greater than that and also to be valued at levels higher than what I expect, but with that a bigger market share, merger&acquisitions and new markets and sacrificing short term earnings would be needed.

Catalyst

-          Scaling up safety segment (industry/law enforcement)

-          Bigger market share of focus area

-          Merger & acqusition