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CyanConnode expected to be profitable next year

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Hardman & Co has initiated research on narrowband radio frequency communications networks developer CyanConnode (LON: CYAN) and it believes that the company could be profitable within two years.

Smart meter roll outs have been gathering pace in India and the company’s RFMesh smart meter communications technology is an important component in several of the contracts. There are also potential contract wins in other countries, such as Thailand, the UAE and Egypt.

There are orders for more than 513,000 modules and potential to gain more in India and other parts of the world.


The short-term forecasts should be achievable with the current contracts if the expected roll outs continue. Additional contracts could lead to upgrades.

It is sensible to be cautious, though. The Covid-19 situation in India could hamper progress – at least in the short-term. If the IPL cricket is suspended, then other activities could also be delayed or suspended.

That could delay the growth in revenues and therefore the move to profitability.


CyanConnode has done well to conserve its cash and continue to grow. Advance payments and R&D tax credits have helped. There was £1.5m in the bank at the end of March 2021, offset by short-term borrowings of £752,000.

In the year to March 2022, revenues are forecast to improve from £6.2m to £8.83m and the pre-tax loss should reduce from £2.49m to £1.32m. There would be a cash outflow, but net cash would still be around £500,000 on these forecasts.

That suggests that even if there are Covid-related delays, the balance sheet be able to cope unless they are lengthy.

Hardman believes that revenues could reach £18.8m in 2022-23. That could generate a pre-tax profit of £2.6m and earnings of 1.9p a share. This will lead to significant cash inflow. At 6.9p, the shares are trading on less than four times forecast 2022-23 earnings.

This is a business that has been difficult to forecast, though. It is probably best to assume that CyanConnode will not make the 2022-23 forecast, but there is good reason to believe that it should become profitable. The business is going in the right direction and Covid-19 will only delay this growth and not stop it.

The share price is well below its recent high and there is plenty of upside over the next couple of years, whatever delays there are. Long-term buy.

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