Buy Exro Technologies for a double, Haywood says

Haywood Capital Markets is keeping its Top Pick for 2021 designation for Exro Technologies (Exro Technologies Stock Quote, Chart, News, Analysts, Financials TSXV:EXRO), with analyst Colin Healey arguing in a client update on Thursday that the clean tech company is perfectly positioned in the electrified transportation market.

Calgary-based Exro, which designs intelligent control solutions in power electronics and is commercializing its advanced motor control technology, the Coil Driver, announced on Thursday an agreement with Cleveland-based LAND Electric Motorcycles to produce up to 2,000 Coil Driver units this year. Exro says the two companies will work to optimize the powertrain of LAND’s District motorcycle, enabling “a new powertrain system solution in the emerging lightweight electric motorcycles industry.”

“We are so glad to be collaborating with LAND to optimize their motorcycle’s powertrain,” said Sue Ozdemir, Exro’s CEO, in a press release. “This collaboration takes us another step closer to revenue growth and commercialization of our Coil Driver technology.”

Exro’s share price popped on the news on Thursday, with the stock now up about 240 per cent since starting trading on the TSX Venture this past September. Before that, Exro had been listed on the Canadian Securities Exchange for about three years.

Exro recently finished in-house testing of its 100 Volt Coil Driver with Potencia Industrial’s electric car motor, which will now undergo operational testing in an electric car application with results expected by the third quarter of this year.

In his report, Healey called the new LAND deal transformative for Exro.

“Today’s news is important as it provides further industry recognition and validation of the commercial potential of Exro’s technology to increase efficiency within the powertrain of EVs and sets a timeline for formal commercialization of its Coil Driver technology,” Healey wrote.

“With success in vehicle integration and optimization over the next couple of months, Exro will be in a position to ship commercial-spec Coil Driver units to LAND this year, representing a major milestone for the company,” he said.

With more such announcements and commercial relationships likely on the horizon, Healey said investors “should be involved now” to gain exposure to the likely accelerating group of catalysts for the stock.

“The bigger picture is that electrified transportation of all types and sizes is a large and rapidly growing market, and Exro is perfectly positioned to insert its technology almost anywhere within its scope, from small/light applications to heavy equipment,” Healey said. “Today’s news has the very important read-through that from an ‘Exro customer perspective,’ the economic/value proposition of integrating Exro’s technology is clear and valid.”

Healey said with a little under $50 million in cash, Exro has the financial flexibility to carry out its proof-of-concept and deployment across a number of focus areas in coil driver and battery management. The analyst said while Exro shares have performed very well of late, he sees more potential for returns over the coming 12 to 18 months, adding that Exro plans to uplist to the TSX main board during the first half of 2021 and the NASDAQ potentially by late H2 2021.

Healey said with continued execution, Exro’s moves to the TSX and NASDAQ will open up a larger audience of buyers, supporting his current price target. With the update, Healey has maintained his “Buy” rating and $8.00 target for Exro, which at the time of publication represented a projected one-year return of 112 per cent.

By the numbers, the analyst thinks Exro will generate 2021 revenue and EBITDA of $2.4 million and negative $6.2 million, respectively, 2022 revenue and EBITDA of $26.3 million and negative $0.3 million, respectively, and 2023 revenue and EBITDA of $55.5 million and $8.0 million, respectively.

Exro, which closed in December on a marketed public offering of about 12.9 million shares at $3.25 per share for proceeds of $42.0 million, last reported its financials in late November, where its third quarter 2020 included no revenue compared to no revenue a year earlier and a net loss of $3.0 million compared to a loss of $1.1 million a year earlier.

Exro has had a number of developments in recent months. Over the quarter ended September 30, Exro closed on a short form prospectus of $8.0 million and added two new key partnerships in Australian automotive tech company SEA Electric and German drivetrain manufacturer Heinzmann.

In October, Exro reported positive testing results on its Coil Driver in application with electric bicycle company Motorino, while in November came the completed engineering validation of the 100 Volt Coil Driver, a milestone for the company, according to Exro.

“Validation of the 100V Coil Driver engineering technology is a key milestone for Exro to delivering commercial products in the rapidly growing electric car markets. The 100V Coil Driver will deliver next generation performance in power and efficiency to mobility applications with electric powertrains,” Exro said in a November 30 press release.