We initiate on ISPR at Strong Buy ($10 PT). Ispire Technology Inc. is an e-cigarette and cannabis vaping manufacturer, operating as a fast-moving subsidiary from LA.
Beneath the veneer of the mature industry it is in, ISPR has quickly built the commercial infrastructure and regulatory momentum to launch a sustained next phase of growth. Consensus models for top-line contraction into FY25 are flat-out wrong, we believe, with our work showing: visible evidence of accelerating NA sales post-PMTA process; a US disposable nicotine launch that is already on track to add $7.7mn in incremental revenue this 2H; and full Malaysia capacity ramp adding at least $13mn of FY25 capacity.
These catalysts are real, not optional, and running through the business now; embed them into a model and it supports FY24/FY25 revenues of $180mn/$220mn, vs. The street at just $139mn for FY25.
At a conservative 2.5x forward P/S multiple - meaningfully at a discount to the company historical median, but an appropriate reflection of discipline around regulatory/credit-loss headwinds - we get to a valuation supported by both above-The street growth and a rigorous appraisal of risk (10-K Based Rec).
Regulatory and credit loss costs are a clear and present focus, but history and recent disclosures give us confidence these can remain contained at under 3% of sales.
Our upside case relies on announced, quantifiable drivers already tracking above expectations, positioning ISPR for a sharply asymmetric return profile as both sentiment and fundamentals converge.