Revenue upside and margin expansion is making Lumenpulse (TSX:LMP) an attractive investment, says Euro Pacific Canada analyst Andrej Krneta.
On Friday, December 11, Lumenpulse reported its Q2, 2016 results. The company posted EBITDA of $4.2-million on revenue of $37.4-million, a topline that was up 46.1 per cent over the same period last year.
“We are very pleased to report an outstanding quarter with record revenues, gross margin, EBITDA, and net income,” said CEO François-Xavier Souvay. “Q2 Fiscal 2016 and year-to-date results clearly validate our long-term business model.” Lumenpulse Products revenues grew in Q2 by 60% compared to last year with a very significant contribution from North America which grew 105%. Our top-line growth remains well above the industry growth rate.”
“Our objectives remain to continue growing Lumenpulse’s business at a rate that exceeds the growth rate in the general lighting market for LED products, and, within the next four years, to converge towards market growth, to maintain an Adjusted Gross Margins of approximately 50% and ultimately to deliver Adjusted EBITDA margins of approximately 18% to 20%,” added CFO Robert Comeau.
Krneta notes that Lumenpulse’s second quarter easily bested his and the street’s expectations. He says his expectation of accelerating momentum is being confirmed.
“Lumenpulse’s FQ216 results revealed operating leverage potential beyond recent gains,” says Krneta. “Quarterly results outperformed expectations, upstaging difficult benchmarks on a sequential basis. Further, reversal of the FCF outflows positions LMP to overshadow headwinds of the past (operational slip-ups, turnover of insiders’ holdings). All in, our expectations of an accelerating momentum stand confirmed: firming revenue growth, smoother sales pattern, and potential for an upside to margin leverage. To no surprise, LMP’s mid-term guidance remains intact. We head into FH216e with our Buy recommendation and $22 price target firmly in place.
In a research update to clients last Friday, Krneta maintained his “Buy” rating and one-year target of $22.00 on Lumenpulse, implying a return of 38 per cent at the time of publication.