Spectacular Christmas morning cruise through the remants of giant Tabular iceberg B15Y, which is now grounded just off Bransfield Island at the N tip of the Antarctic Peninsula…[/caption]Exro Technologies (Exro Technologies Stock Quote, Chart, News, Analysts, Financials TSXV:EXRO) has been the hot ticket this past week, but that’s just the tip of the iceberg says Haywood Capital Markets analyst Colin Healey. In a report to clients on Tuesday, Healey reiterated his “Top Pick” status for EXRO over 2021, arguing that the clean tech company is firming up accelerated pathways to commercialization of its battery and motor technologies.
Calgary-based Exro, which designs intelligent control solutions for power electronics in electric motors and batteries, announced on Tuesday an expansion of its collaboration with SEA Electric to include co-development of Exro’s Battery Control System (BCS) that optimizes performance of repurposed, “second life” electric vehicle batteries (i.e., those that have reached the end of their “first life” run).
SEA Electric is an Australian automotive tech company with a proprietary electric power system called the SEA-Drive. The collaboration with Exro features the BCS but also expanding their partnership on commercializing Exro’s Coil Driver in SEA’s electric trucks to now include a Class 8 truck for the Canadian market, with a production target of 400 trucks at minimum by the second year post validation.
“This widened collaboration will significantly accelerate development of Exro’s Battery Control System and identify a key end of first-life battery source. It will also highlight a true example of the circular economy and how Exro can impact sustainability and energy consumption by extending batteries to a second life,” said Exro in a press release.
The deal will also see Exro invest US$5 million in SEA Electric by subscribing for 124,380 Series A preferred shares at US$40.1995 per share.
Last week, Exro announced an agreement to commercialize the Coil Driver with Cleveland-based LAND Electric Motorcycles to produce up to 2,000 Coil Driver units this year.
Micro-cap stock Exro launched on the TSXV this past September and had already produced nearly a triple when it shot up last week from about $3.80 per share last Wednesday to now above $6.00 by Tuesday. (All figures in Canadian dollars except where noted otherwise.)
Healey said the flow of recent news is “likely just the tip of the iceberg” for Exro as it rapidly advances its technology. Healey recommended adding to positions in EXRO as the company progresses towards formal commercialization.
“With [Tuesday’s] announcement, Exro has yet again increased visibility on its path to commercialization across two main technology pillars (Coil Driver and BCS), demonstrating its ability to tap industry contacts and leverage relationships to accelerate development and bring its technologies to market,” Healey wrote.
“Recognizing the opportunity within an existing partnership to further enable the ‘circular economy’ and make an impact on sustainability by extending the useful life of EV batteries is a tribute to management. Last week, Exro announced an agreement with LAND Electric Motorcycles to collaborate to implement Coil Driver technology within the powertrain of LAND’s light electric motorcycle. This could lead to commercial production this year following a successful validation process,” Healey said.
With the update, Healey has maintained his “Buy” rating and $8.00 target price with a risk rating of High. At the time of publication, the $8.00 target represented a projected 12-month return of 16.8 per cent.
By the numbers, Healey 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.
“With about $45 million in cash following the SEA Electric investment, Exro has the financial flexibility to accelerate proof-of-concept and deployment across several focus areas (coil driver and battery management) and we anticipate it will continue to execute on value additive items in sectors highly sought after by investors, similar to the track record built through 2020,” Healey wrote.
Healey commented that momentum in the clean tech and green energy spaces continues to build as governments worldwide push for a green economic recovery from the pandemic and set their net-zero emissions targets, thus turning investor focus more clearly on sustainable investments.
“While Exro shares have performed very well as of late, we continue to see potential for material shareholder returns in the coming 12-18 months as the company is at an inflection point — transitioning from the proof of concept phase and into deployment of its patented technologies across a wide range of applications,” Healey said.
The analyst noted that Exro is targeting to uplist to the TSX main board during the first half of 2021 and the NASDAQ potentially by late in the second half of the year, with both moves to open up the company to larger audiences and to provide support to his $8.00 target and roughly $1 billion valuation.
Exro’s last reported quarter was its Q3 2020, delivered on November 30, which featured no revenue and a net and comprehensive loss of $3.0 million.