Elspec: How much of the thesis rests on the new G4 before there are sales
Elspec already carries New G4 at a ILS 5.9 million book value and a ILS 20.4 million recoverable amount, yet the official launch is still pushed to late 2026. This follow-up shows why the sensitive part of the forward thesis still rests on certifications, beta versions and a valuation model, not on broad commercialization that has already been proven.
The main article dealt with the full 2025 picture. This follow-up isolates only one question: how much of the forward read now rests on the new G4 before it has broad commercial sales. That matters because this is where Elspec’s measurement bottleneck sits, where the largest intangible asset on the balance sheet now sits, and where an external valuation already gives the product a meaningfully higher value than its carrying amount.
The existing business is not coming into this from a weak position. The measurement and analysis activity finished 2025 with ILS 51.7 million of revenue and ILS 34.9 million of segment profit. So Elspec does not need the new G4 to prove that it has a real business. It does need the new G4 to prove that the next stage of that business can remain relevant as market requirements move higher on accuracy, communications and cybersecurity.
This is the core point. New G4 already sits on the balance sheet at ILS 5.873 million, has been tested against a ILS 20.372 million recoverable amount, and accounts for about 55% of all capitalized development costs in the measurement portfolio. At the same time, the official launch is still only expected toward the end of 2026, and the disclosure itself contains tension: in one place the company says first beta versions were sold in 2025, while elsewhere it says that as of December 31, 2025 no sales had yet been made of the product covered by the Israel Innovation Authority grant. Put differently, the accounting already speaks the language of an asset. Commercialization still speaks the language of proof.
Why The New G4 Is A Requirement, Not A Bonus
The reason this matters starts with the old product, not with the balance sheet. Elspec says explicitly that the current G4 products do not support the new Grade A standard, and that regulatory pressure is also increasing around cybersecurity requirements. It goes further and says some of the new requirements cannot be implemented on the existing G4400 hardware base, while some of the electronic components used in the legacy product are becoming harder to source.
That changes the framing. The new G4 is not just an optional growth lever if things go well. It is the replacement mechanism for an aging platform that is approaching the limits of what it can do for current market requirements. That is why there is no contradiction between the still-strong economics of the measurement business in 2025 and the weight the new G4 carries in the forward thesis. The current business can still generate profit. The question is whether it can keep its technological edge as tenders and compliance requirements get tougher.
The company effectively says this without using that exact language. Since 2021, the development department has been dedicating most of its resources to the next generation of measurement products on a new hardware base. That does not read like a catalog extension. It reads like a core-platform transition.
What Is Already Sitting On The Balance Sheet
The gap between commercialization and accounting recognition is already meaningful. At the end of 2025, New G4 carried a book value of ILS 5.873 million. For comparison, G5 carried ILS 1.449 million and PureBB carried ILS 3.336 million. So more than half of all capitalized development costs in the measurement product family are already concentrated in a product that has still not been officially launched.
The spending pattern in 2025 points the same way. The company reported ILS 9.971 million of R&D expense in the year, while also capitalizing ILS 1.552 million of R&D costs. That does not prove all of the year’s capitalization belonged to New G4 alone, but it does show that Elspec is still moving part of the development burden from the income statement to the balance sheet while the most important asset in that capitalized pool still is not living in the market like a normal commercial product.
Scale also matters here. Based on the April 6, 2026 closing price of 468.9 agorot and 19,463,746 shares outstanding, Elspec’s equity value stands at roughly ILS 91.3 million. That means New G4’s carrying amount equals about 6% of the company’s current equity value, while the recoverable amount assigned to it already equals about 22%. This is no longer a side item.
How The Accounting Cushion Was Built
The most impressive part, and also the most delicate part, is that the impairment work gives New G4 a very comfortable cushion. The company used an independent external valuer, and the product’s recoverable amount was set at ILS 20.372 million, almost 3.5 times the carrying amount. That is why no impairment was recorded. At the accounting level, this is a strong line of defense.
But it matters what that defense is built on. The valuation assumes a 14-year product life, revenue beginning from 2026 onward, a sales base that leans mainly on utilities needing dozens to hundreds of units, and relatively low unit sales in the early penetration years. At the same time, the model assumes exceptionally high gross margin of 81.9% to 83.3%, selling and marketing expense equal to 22.1% of revenue, G&A equal to 10.7% of revenue, an 11.3% tax rate, and a 21.1% discount rate.
| Assumption | Value | Why it matters |
|---|---|---|
| Product life | 14 years | The model spreads value over a long period before broad commercialization is proven |
| Revenue base | From 2026 onward | The value rests on what should happen next, not on sales already demonstrated in 2025 |
| Gross margin | 81.9% to 83.3% | This is a high margin assumption, so actual pricing power will matter a lot |
| Selling and marketing | 22.1% of revenue | The model still assumes meaningful commercial build-out cost |
| G&A | 10.7% of revenue | Part of the thesis relies on future operating leverage |
| Discount rate | 21.1% | The model does recognize risk, but not enough to eliminate value support |
The most revealing table in the filing sharpens the point further. Even if one takes only 70% of the target revenue base, the recoverable amount still comes out at ILS 12.637 million, more than twice the carrying amount. So the accounting cushion is wide.
That is not an accounting mistake. The model is built so that even a partial revenue outcome still protects the book value. But that is also the analytical point: the balance sheet is already giving the product meaningful credit on the basis of a future penetration model. It is not answering whether that penetration has already been commercially proven.
Where Commercialization Is Still Missing
To the company’s credit, 2025 was not just a presentation year. Elspec says it completed all hardware and software certifications in accredited labs, adapted the product for strategic customers, and released first units into the field for feedback. In the business description, it also says first beta versions of the product were sold in 2025.
And yet the filing itself does not let the reader call this a full commercial launch. In the same annual report, in the context of the Israel Innovation Authority grant for automatic and serial production capabilities of a new measurement product, the company says that as of December 31, 2025 the product was still in the final stages of development and no sales had yet been made. It also places the official launch only at the end of 2026.
| Layer | What already happened | What is still missing |
|---|---|---|
| Technical readiness | Hardware and software certifications were completed, and the product was adapted for strategic customers | The company still needs to show that those adaptations convert into repeat tenders and repeat orders |
| Early market exposure | First units were released into the field and first beta versions were sold | Broad, normal commercial sales are still not demonstrated |
| Accounting support | The product carries ILS 5.873 million of book value and a ILS 20.372 million recoverable amount | That value is still built on a penetration model, not on a mature sales base |
| Timeline | The transition is clearly well underway | The official launch still sits only in late 2026 |
A reasonable reading is that the company is already past the idea stage, but still short of the proof stage. There is a product, there are certifications, there are first customers, and there is even an indication of initial paid exposure. But until there is a run of normal commercial orders, the market is still being asked to trust that the move from beta to full rollout will happen at the pace and economics assumed in the valuation model.
What Has To Happen Next
The next real test of the thesis will not come from another value-in-use line on the balance sheet. It will come from four concrete checkpoints.
First, the official launch really has to happen by late 2026, without another delay. Once the company itself puts the step-up in commercial activity on that timeline, any slippage already changes the timetable on which the valuation rests.
Second, the next reports have to start showing sales that look like commercialization, not just first units, beta versions, or careful language around strategic customers. That can show up through revenue, through the beginning of royalty payments to the Innovation Authority, or through more explicit disclosure on the scale of penetration.
Third, the new product has to prove that it really solves the compliance and cybersecurity bottleneck, meaning that the technological upgrade starts translating into better tender eligibility or clearer competitive positioning.
Fourth, the economic assumptions in the model need to start getting real-world anchors. As long as 81.9% to 83.3% gross margin lives only inside a valuation model, it remains an assumption. Once sales come through, it becomes possible to test whether that is real product economics or a cleaner number on paper than in the field.
Conclusion
The new G4 has long since stopped being just a development project. It is already an accounting asset, it is a strategic requirement, and it is a meaningful part of the way Elspec can be read going forward. But as of the end of 2025 it is still not a product with broad commercialization proven in the numbers.
That does not make the thesis wrong. It does mean a material part of it still rests on an in-between stage: after certifications but before full rollout, after valuation support but before broad sales, after field deployment but before repeat demand is proven. Anyone reading Elspec through the new G4 has to hold two sentences in mind at the same time: there is a real asset here with a clear industrial rationale, but its business validation is not finished yet.