In a research update to clients Wednesday, Wolff maintained his “Buy” rating and one-year price target of $3.85 on GRA, implying a return of 196 per cent at the time of publication, including dividend.
Wolff says GRA’s plant is on time and under budget, and ready to begin commercial production in April 2020. The analyst adds that there is burgeoning value in the fact that the company is currently negotiating contracts with customers.
“NanoXplore has been working with a list of customers in different verticals, including automotive, industrial piping, commercial construction and sports equipment, over the last two years qualifying graphene-enhanced formulations to different plastic applications,” Wolff notes. “With the plant progressing, we are possibly only four months away from long lead equipment being installed. Hence, NanoXplore has entered talks regarding customer contract agreements for specific annual tonnages with several potential customers. We expect the company to announce the signing of such contracts over the next two months.”
Wolff thinks NanoXplore will post EBITDA of negative $3.0-million on revenue of $67.9-million in fiscal 2019. He expects those numbers will improve to EBITDA of positive $500,000 on a topline of $85.1-million the following year.
“With the financing in place, and a very strong management team, NanoXplore is positioned for success and will soon be the only producer of large-volume commercial quantities of graphene globally,” he adds. “We view this as important as the execution risk for substantive growth has been reduced considerably and we believe much higher valuations will ensue.
NanoXplore investment thesis from Paradigm Capital:
NanoXplore is the largest global producer of low-cost, high-quality graphene. Owing to its recent discovery (2004), graphene has very few end-use markets. NanoXplore is aggressively developing end-use markets by using graphene as a performance enhancer for a variety of different plastics with many different end products. The company is in the process of increasing its graphene production from 25 tpa to 10,000 tpa by 2021.