Beacon Securities analyst Ahmad Shaath has raised his target on NanoXplore (NanoXplore Stock Quote, Chart, News TSXV:GRA) based on the company’s just-released quarterly numbers and a ramp-up in market development efforts.
In an update to clients on Wednesday, Shaath reiterated his “Buy” rating and moved his target price from $2.25 to $3.10, which at press time represented a projected 12-month return of 35 per cent.
Canada-based graphene company NanoXplore, a manufacturer and supplier of graphene powder for use in industrial markets including transportation, packaging, electronics and other sectors, announced its fiscal fourth quarter 2020 results, posting operational revenue of $10.5 million (excluding about $2.0 million in income from grants and government assistance). The topline was down 56 per cent year-over-year as the company idled its manufacturing plants for most of the quarter due to COVID-19, where phased
resumption of operations started in May. In its largest segment, transport, where Class 8 truck parts through Sigma Industries represent more than 70 per cent of operational revenue, were down 58 per cent year-over-year. Adjusted EBITDA for the quarter was a loss of $1.1 million and a loss of $4.5 million for the year.
Both numbers were better than Shaath’s estimates at $6.2 million in revenue and an EBITDA loss of $2.7 million (consensus was $10.4 million and negative $1.8 million, respectively.
At the same time, Shaath said the company is moving forward, having successfully commissioned its first module in its commercial graphene production facility in the week following the quarter end (which was June 30, 2020) and having completed an asset acquisition in the US which will allow it to have graphene manufacturing near some of its key OEM clients’ facilities.
Shaath said feedback from NanoXplore commercial-scale sales efforts are very positive, which in turn has led the analyst to revise his long-term production volumes and trimline.
The analyst also noted that the company’s lithium ion battery program “looks very promising” after it successfully concluded Stage 1 lab tests of its battery program targeting the use of graphene in the anode. NanoXplore has since moved onto Stage 2 on October 1, with the aim of building a pilot plant and then a final investment decision by the end of 2021.
“Based on our discussions with management, we are optimistic about this program given that it is working with cathode and electrolyte formulations that are widely used in the market today, minimizing the risk to commercialization. If successful, GRA’s technology could boost the capacity of current generation batteries (e.g. NMC and LFP) by up to 40 per cent. This represents hidden value in NanoXplore’s valuation that we believe is not currently reflected in the street’s outlook (us included),” Shaath wrote.
“With its commercial-scale production facility now running smoothly, GRA’s market development efforts have accelerated materially,” Shaath wrote. “The discussions with its potential clients have been extremely positive, to the point where GRA is already planning for the next two modules (potentially tripling its capacity). We revised our forecast accordingly.”
Shaath is now calling for fiscal 2021 revenue and adjusted EBITDA of $72.4 million and negative $0.2 million, respectively, and for fiscal 2022 revenue and adjusted EBITDA of $93.4 million and $6.8 million, respectively.