paragon’s Q222 results show an acceleration of revenue growth across the business and, while adjusted EBITDA was modestly lower, management has increased guidance. It now expects FY22 revenues of €170m while continuing to expect an EBITDA margin over 15%, with free cash flow (FCF) of €12m. While the equity value remains subordinate to financing bond redemption issues, we anticipate positive progress by the year end.

paragon has spent much of the pandemic refocusing on its core automotive activities and addressing the issue of bond refinancing. Both are now largely complete and management’s revised growth strategy targets ambitious financial targets over the next few years, with a positive start already made. As much of its product portfolio is fuel type agnostic, paragon is well positioned to address the evolving connectivity, digitalisation and electrification requirements of electric vehicles (EVs). We believe the strong growth outlook merits a higher FY23e P/E rating than the current 3.6x, which we feel reflects concern over the refinancing of the outstanding CHF21m bond due in April 2023.

paragon’s renewed focus on its core Automotive operations should soon be confirmed by the divestment of Voltabox. The refreshed strategy remains to drive sustainable, profitable growth through the development of innovative proprietary technology solutions and expanding geographical penetration and footprint. Despite the pandemic disruption to global car production, paragon Automotive is delivering strong sales growth. FY21 revenue guidance is for €145m with EBITDA margins of 12–15%. We expect a recovery in car output and new products to drive growth from FY22.