On 18 April Kromek announced a major seven-year agreement with a Tier 1 OEM to develop and incorporate its CZT-based detectors in the OEM’s advanced medical imaging scanners, and further deals have since followed. In order to fund these opportunities, on 5 May the Group announced a fund-raise of £8m (gross).
It is our assumption that the Tier 1 OEM segment targeted is the CT scanner market. This was worth an estimated US$6.7bn in 2022 and, at a 5.6% CAGR, is expected to reach US$9.92bn by 2029. The market is in the process of transitioning to efficient and accurate processes based on cadmium zinc telluride (CZT) semiconductors.
Following the acquisition of Redlen Technologies Inc. in 2021 by Canon, Kromek remains the only commercial-scale independent source of this key CZT-based technology.
Given the market position of a Tier 1 OEM CT supplier and outlook for the CT market, we calculate that a collaboration in this field could exceed a cumulative £100m contribution to Kromek’s revenue by 2029. Additionally, we have revisited the Canon-Redlen acquisition; which would indicate a Kromek sum-of-parts valuation of between 56p and 84p per share.
Whilst awaiting further details of the Tier 1 and Tier 2 OEM agreements, we maintain our Fair Value at 26p/share for now.
