Despite its exposure to high-growth megatrends, such as IoT and cybersecurity, overall revenue growth for IAR Systems' programming tools has been low. We believe the Q1 report signalled that the worst is in the past and that the measures taken by its new leadership are leading to a gradual turnaround in its growth trajectory. We have raised our 2023e adj. EBIT by 2%, and reiterate our fair value of
Key points of Q1 report. Net sales of
2022e adj. EBIT lowered by 7%, but 2023e raised by 2%, to reflect lower capitalised development costs, although we have raised our net sales forecasts by 3-2% for 2022-2023, as we are cautiously optimistic about price-hike plans and commercial momentum for its security and RISC-V offerings. IAR Systems' aim is to accelerate organic growth to 10%+ YOY in 2022 (our forecast: 9%). With a 97% gross margin, we expect its profits to grow even faster.
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