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№ 227 33 filings · 2021-07-14 → 2026-05-12

KROMEK GROUP PLC

KMK
Industrial Goods and Services Share price 7.90p Market cap £52m Overall fit 380 /1000

Interesting specialty industrial with genuine technology moat and improving profitability, but only a tangential AI-receiver (radiation detection with some ML applications, not picks-and-shovels AI) and limited scale/liquidity for a discipline-focused portfolio. Valuation is fair rather than compellingly cheap given transitional post-Siemens uncertainty.

Fair value range 8p–12p Mid case · £66m
Absolute upside +26.5% vs current market cap
Conviction 3/5 confidence in undervalued call
Supports the call
  • clean segment disclosure post-FY25
  • consistent recent beat/in-line track record
  • clear management medium-term target as valuation anchor
Limits the call
  • Siemens Enablement revenue tapers rapidly from FY27, creating wide range of underlying run-rate outcomes
  • long OEM design-in cycles make growth timing uncertain
Methodology

EV/EBITDA multiple on NTM adj EBITDA, cross-checked vs medium-term margin target

In one line · bull case

Only independent commercial-scale CZT producer with a landmark Siemens Healthineers deal validating the technology, expanding OEM pipeline in medical imaging and structural CBRN tailwinds — now profitable at a modestly discounted valuation.

In one line · biggest risk

Siemens licensing revenue rapidly tapers from FY27 and the underlying business must roughly double to sustain reported profitability, with long OEM adoption cycles making that path uncertain.

Drivers
AI beneficiary 30 /100
Radiation detection with peripheral AI/ML use (i-RASE grant, bio-detection image processing) but not a direct AI-buildout beneficiary.
Operating leverage 60 /100
High fixed manufacturing and R&D cost base; H1 FY26 gross margin 72% shows dramatic leverage when licensing/product mix favourable.
Earnings vs expectations 65 /100
Two consecutive years of positive surprises on Siemens impact, now transitioning to in-line delivery with no misses in covered period.
Growth momentum 70 /100
H1 FY26 revenue +305% (Siemens-boosted), CBRN revenue +117% underlying; strong contracted revenue visibility for FY26.
Moat 55 /100
Only independent commercial-scale CZT producer globally; high barriers to entry via 190+ patents, capital intensity and long OEM qualification cycles.
Earnings quality 45 /100
Complex licensing revenue recognition with material cash-vs-revenue timing differences; historical bad-debt write-offs and heavy capitalisation of R&D (£4.4m/yr) reduce reported profit quality.
Management quality 50 /100
Delivered landmark Siemens deal and swung to first-ever profit; long-serving CEO Arnab Basu; long history of losses and repeated equity raises tempers assessment.
Cyclicality 45 /100
Mixed exposure: government defence spending relatively stable, medical imaging capex somewhat cyclical, security screening tied to aviation cycle.
Leverage 20 /100
Net cash position after Siemens receipts and Polymer N2 loan repayment; £6m RCF partially drawn but low absolute debt.
Value-trap signals · 4
  • History of repeated equity raises and convertible loans over covered period
  • Only just achieved first-ever profit in FY25 after 10+ years of losses
  • Recurring reliance on related-party (Polymer N2) financing until FY25
  • Thin cash position (£1.2m at H1 FY26) despite operational profitability

Kromek Group plc (KMK) — Investment Research Note

Executive summary

Kromek is a UK-listed (AIM) specialty detection technology company producing cadmium zinc telluride (CZT) radiation detectors for medical imaging (SPECT, PCCT, MBI, BMD) and CBRN nuclear/bio-security applications, positioned as the only independent commercial-scale CZT producer globally. The group delivered its first-ever pre-tax profit in FY25 (£3.1m PBT, up from a £3.5m loss in FY24), driven by a transformational $37.5m Siemens Healthineers Enablement Agreement, with FY26 tracking to in-line consensus revenue of £27.2m and PBT of £2.15m 2026-05 trading update. The single most important valuation question is what "normalised" post-Siemens economics look like from FY27 onwards, when the high-margin licensing revenue tapers to ~$2.5m and underlying growth in CZT tile supply and CBRN detection needs to carry the P&L.

Fair value estimate

Range: 8p – 12p per share (mid ~10p), implying market cap £52m – £79m (mid ~£65m).

Methodology: Blended EV/EBITDA multiple on next-twelve-month adjusted EBITDA, cross-checked against management's medium-term target of £60m revenue and 30% EBITDA margin 2025-06 Capital Markets Day.

Key assumptions:

  • FY26 adj EBITDA of ~£7-9m (reflecting lower Siemens contribution of $11.7m vs $20.5m in FY25, offset by underlying growth in both divisions)
  • 8-10x EV/EBITDA multiple, appropriate for a specialty industrial with genuine technology moat but limited scale
  • Balance sheet net debt ~£1m (post RCF draw), largely offsetting cash

Vs. current market cap of £48.5m at 7.40p: absolute upside ~35% to midpoint (range: +7% to +64%).

Sanity check on medium-term target: £60m revenue × 30% EBITDA = £18m EBITDA. At 8-10x EV/EBITDA = £144-180m enterprise value, or ~22-27p per share if achieved in 3-4 years — supportive of the upper end of the fair value range.

Sector context

Sector classification confirmed: Industrial Goods and Services (specialty technology / instruments sub-vertical). Kromek's quality/growth/leverage profile is below typical peers in this sector — it lacks the scale, diversification and consistent profitability of established peers. Listed comparables (all considerably larger):

  • Halma — diversified safety/detection technology (much higher quality/valuation)
  • Judges Scientific — specialty scientific instruments roll-up
  • Mirion Technologies (US) — radiation detection pure-play, closest direct peer

Kromek trades at a significant scale discount reflecting its sub-£30m revenue base and only recent achievement of profitability.

Investment thesis

  1. Siemens Healthineers Enablement Agreement validates CZT market leadership and provides multi-year cash runway. The $37.5m contract ($30m received to date) transformed the balance sheet, enabled repayment of the Polymer N2 term loan, and delivered the first PBT in company history. Critically, the agreement is non-exclusive, allowing Kromek to continue serving other OEMs across the SPECT and CT markets 2025-09 Final Results; 2025-01-30 Interim Results.
  2. Structural shift from scintillator to CZT in medical imaging with Kromek as the only independent commercial-scale producer. Kromek now works with 8-9 tier-1 OEMs and is progressing to commercialisation in photon-counting CT — a large addressable market where major OEMs (ex-Canon/GE/Siemens) have no in-house CZT capability 2026-01 Interim Results.
  3. CBRN detection tailwinds from geopolitical spending increases. Kromek was selected under two four-year UK Government frameworks (Home Office Radiological Nuclear Detection, worth up to £84m; Resilience Framework), with initial orders of £1.7m already received, plus a £2m MoD contract in FY25 and new distributor agreements in 39 countries 2025-09 Final Results; 2026-01 Interim Results.

Key risks

  1. Siemens revenue tapers rapidly — underlying business must scale to compensate. Enablement revenue was £16.5m in FY25, ~£11.7m expected FY26, ~$2.5m in FY27, then zero. Excluding Siemens, H1 FY26 Advanced Imaging revenue was only £2.5m 2026-01 Interim Results. The underlying run-rate must more than double to sustain reported profits.
  2. Fragile cash position and history of recurrent equity/debt raises. Cash was £1.2m at 31 Oct 25 with £1m drawn on the £6m HSBC RCF (£2m more drawn post-period). Prior fundraising history includes £13m (2021), convertible loans (2022-24), £8m placing (2023), and multiple loan facilities with Polymer N2 2026-01 Interim Results; 2025-09 Final Results.
  3. Customer concentration and long OEM adoption cycles. Siemens represented essentially all Advanced Imaging licensing revenue in FY25, and Advanced Imaging OEM adoption typically requires 3-7 year design-in cycles before commercial supply. Delays in OEM roll-outs (or a competitor sourcing CZT in-house) would materially reset the growth trajectory [inferred from filings pattern].

Operating leverage

Kromek has material operating leverage in the mid-tier range (60/100). The cost base is dominated by high fixed manufacturing costs (CZT growth furnaces in UK and US), fixed capitalised R&D (~£4.4m/year in FY25) and admin costs of ~£16m — largely independent of revenue volume. Gross margin is highly product-mix dependent: licensing revenue carries ~100% gross margin, product ~50%, and R&D contract revenue ~30-40%. H1 FY26 illustrates the leverage vividly — revenue up ~4x (£3.7m→£15.0m) drove operating profit from a £4.8m loss to £3.2m profit; gross margin jumped from 57% to 72% 2026-01 Interim Results. Management's medium-term £60m revenue / 30% EBITDA target implies incremental EBITDA drop-through of ~40-50%. A 10-20% revenue surprise above expectations, if it came from product/licensing (not R&D contract), would add disproportionately to profit — probably 50-100% incremental EBITDA. However, absent licensing tailwinds, incremental drop-through from pure product growth is more like typical industrial economics (~25-30%).

Value-trap signals

  • Repeated dilutive fundraisings across the covered period (2021 placing £13m, 2023 placing £8m, multiple convertibles)
  • Historically loss-making for 10+ years — FY25 was the first-ever profit
  • Late/postponed FY24 results (delayed from September to late October 2024) — a modest governance flag though ultimately delivered ahead of expectations
  • Recurring reliance on related-party debt (Polymer N2 Ltd, a significant shareholder, provided £5.5m term loan plus £4.4m of additional working capital support)
  • Thin trading liquidity typical of sub-£50m AIM stocks

These are meaningful concerns but are largely receding: the balance sheet has been restructured, Group is now profitable, and OEM traction is building.

Earnings vs. expectations

Recent track record has skewed to beats or in-line:

  • FY24 (Oct 2024): Adj EBITDA £3.1m "ahead of market expectations" per May 2024 trading update
  • FY25 (Sep 2025): Revenue £26.5m and PBT £3.1m "significantly ahead of market expectations" (May 2025 trading update flagged PBT slightly ahead; final beat was material)
  • H1 FY26 (Jan 2026): In line with market expectations; guidance reiterated
  • FY26 (May 2026 trading update): Revenue £27.2m and PBT £2.15m in line with consensus

Pattern: two consecutive years of positive surprise on the Siemens deal impact, transitioning to in-line delivery as consensus catches up. No profit warnings or guidance cuts observed in the covered period.

Conviction

Conviction: 3 (moderate).

Factors anchoring the valuation call:

  • Clean disclosure and full segment reporting from FY25 onward, with clear Siemens revenue phasing
  • Consistent recent track record of meeting or beating guidance
  • Management's own medium-term target (£60m revenue, 30% EBITDA) provides an upside anchor

Factors limiting conviction:

  • Wide range of plausible FY27+ outcomes as Siemens Enablement revenue rolls off; the underlying business run-rate is hard to pinpoint from disclosures
  • OEM design-in cycles are long and hard to time; the "next Siemens" could arrive in FY27, FY28, or not at all
Filings consulted · 33

Every document the LLM read for this note. Click any row to open the source.

  1. 2026-05-12Full Year 2026 Trading Update2026-05-12_9562885_full-year-2026-trading-update.md0.85
  2. 2026-01-20Interim Results2026-01-20_9367656_interim-results.md0.77
  3. 2025-10-27Result OF Agm2025-10-27_9196940_result-of-agm.md0.26
  4. 2025-10-27Pre Close Trading Statement2025-10-27_9195062_pre-close-trading-statement.md0.72
  5. 2025-10-03Notice OF Agm And Publication OF Annual Report2025-10-03_9148990_notice-of-agm-and-publication-of-annual-report.md0.81
  6. 2025-09-16Final Results2025-09-16_9109689_final-results.md0.85
  7. 2025-06-23Capital Markets Day Presentation2025-06-23_8942965_capital-markets-day-presentation.md0.62
  8. 2025-06-18Capital Markets Day2025-06-18_8934797_capital-markets-day.md0.62
  9. 2025-06-03Capital Markets Day2025-06-03_8908813_capital-markets-day.md0.62
  10. 2025-05-08Full Year 2025 Trading Update2025-05-08_8866544_full-year-2025-trading-update.md0.55
  11. 2025-01-30Interim Results2025-01-30_8712774_interim-results.md0.58
  12. 2024-12-13Result OF Agm2024-12-13_8610208_result-of-agm.md0.20
  13. 2024-11-18Notice OF Agm And Publication OF Annual Report2024-11-18_8555227_notice-of-agm-and-publication-of-annual-report.md0.62
  14. 2024-10-28Final Results And Publication OF Annual Report2024-10-28_8511842_final-results-and-publication-of-annual-report.md0.65
  15. 2024-09-30Update ON Full Year Results2024-09-30_8448152_update-on-full-year-results.md0.65
  16. 2024-05-29FY 2024 Trading Update2024-05-29_8227020_fy-2024-trading-update.md0.38
  17. 2024-01-30Interim Results2024-01-30_8011652_interim-results.md0.41
  18. 2023-09-28Result OF Agm2023-09-28_7784048_result-of-agm.md0.14
  19. 2023-09-01Notice OF Agm And Publication OF Annual Report2023-09-01_7731385_notice-of-agm-and-publication-of-annual-report.md0.43
  20. 2023-07-24Final Results2023-07-24_7649722_final-results.md0.25
  21. 2023-05-05Placing Subscription Open Offer And Notice OF GM2023-05-05_7515917_placing-subscription-open-offer-and-notice-of-gm.md0.17
  22. 2023-04-18Trading Update2023-04-18_7463294_trading-update.md0.21
  23. 2023-01-31Interim Results2023-01-31_7288644_interim-results.md0.23
  24. 2022-09-28Result OF Agm2022-09-28_7168247_result-of-agm.md0.07
  25. 2022-09-02Notice OF Agm And Publication OF Annual Report2022-09-02_7209260_notice-of-agm-and-publication-of-annual-report.md0.24
  26. 2022-08-23Fundraising OF 1 14 Million2022-08-23_7190374_fundraising-of-1-14-million.md0.17
  27. 2022-08-05Fundraising OF 1 7M2022-08-05_7010617_fundraising-of-1-7m.md0.17
  28. 2022-08-02Final Results2022-08-02_6956865_final-results.md0.25
  29. 2022-05-16Business And Trading Update2022-05-16_6890870_business-and-trading-update.md0.21
  30. 2022-01-18Interim Results2022-01-18_6906189_interim-results.md0.23
  31. 2021-09-08Result OF Agm2021-09-08_6771722_result-of-agm.md0.07
  32. 2021-08-13Notice OF Agm And Publication OF Annual Report2021-08-13_6551116_notice-of-agm-and-publication-of-annual-report.md0.24
  33. 2021-07-14Final Results2021-07-14_6614787_final-results.md0.10

This research note was authored by a large language model after reading 33 regulatory filings published between 2021-07-14 and 2026-05-12. Each citation refers to a specific RNS announcement in the underlying data set. The note is an opinion, not advice. Do your own work before risking capital.