Translation: Original published in Finnish on 03/10/2025 at 08:41 am EET

Aiforia continued to build its impressive market position in clinical pathology image analysis. In addition to several customer wins, the regulatory bottleneck that was in the way of expanding the product portfolio has now opened, enabling expansion in existing customers and larger deal sizes in future tenders. Although we lowered our forecasts due to slower-than-expected ramp-ups of current customer relationships, we estimate that the company is now moving into a phase of accelerating revenue growth, and that the stock's risk/reward ratio is at an attractive level with this support. We lower our target price to EUR 4.4 (was 4.6) and reiterate our Accumulate recommendation.

Revenue grows with a delay, but costs are managed

H2 revenue was disappointing compared to our expectations at 1.5 MEUR (+3%, Inderes: 2.0 MEUR) due to the decrease in research customer revenue and slower ramp-ups of clinical segment customers. At the end of H2, the order backlog increased strongly to 5.2 MEUR (H1’24: 3.2 MEUR) thanks to customer wins. At the same time, the EBITDA improved with cost discipline in line with our expectations to -4.0 MEUR (H2’23: -4.7 MEUR) and EBIT to -6.1 MEUR (H2’23: -6.5 MEUR). Net cash consumption was 6.5 MEUR excluding the impact of option/share subscriptions, and the company had liquid assets of 11.5 MEUR at the end of the period (net cash 4.9 MEUR).

Aiforia is emerging as the winner of the first wave of clinical digital pathology image analysis

Digitizing pathology is at a very early stage, with only 14% of pathology samples being digitized worldwide until 2020. However, the investment wave is ongoing. With an aging population, the need for pathology analysis is growing and there is already a shortage of pathologists, so there are clear demand drivers for solutions that increase efficiency and capacity. The competitive landscape in the young market is still being formed. Given the competitive strengths of Aiforia's product (customizability, cell-level detection, first commercialized predictive AI model) and significant clinical references, the company has been well positioned to build a position as one of the long-term winners in the market. Based on our research, Aiforia is almost the only player winning clinical customers and is taking a very strong position in the market.

Accelerating revenue growth is only a matter of (short) time

Due to lower-than-expected H2 revenue and slower ramp-ups of clinical customers, we cut our short-term revenue estimates by 15-25%. Due to the lower cost level, our EBIT forecasts decreased by 0-20% for the next few years. We believe Aiforia'srevenue growth is accelerating, as the ramp-ups of won customers are being completed in increasing numbers and the company's broader product portfolio enables gradual expansion sales. We expect growth to be based on Europe in 2025-26, as FDA approvals will still take time. We forecast a very strong annual revenue growth of 60-66% for 2025-28. We expect EBIT to turn positive in 2029 with the support of growth, and the company to carry out 15 MEUR worth of share issues in 2025-26, although with the order backlog and the sector's strongest customer portfolio, we do not expect raising financing at the current price to cause problems. We expect revenue in 2030 to already be 46 MEUR (target: >100 MEUR ~2030). This will naturally require a very strong strategy implementation and continued new customer wins from Aiforia.

Risk/reward ratio remains attractive

Aiforia's valuation (2025-26e EV/S 23-16x) relies on expectations of very strong and scalable growth. By pricing growth at various rates and confidence intervals, we can justify the company's value at a wide range of EUR 1.1-8.0 per share (was EUR 1.4-7.8). Our confidence in the company's growth is still strong in the light of the evidence received. The risk is elevated by the uncertainty of the growth rate, which affects cash development. customer wins have continuously provided more basis for growth, improved access to financing and lowered forecasting risks. We expect the positive news flow to continue and revenue growth to pick up during the current year. Considering this whole, we still find the risk/reward ratio attractive.