Exro Technologies keeps “Top Pick” status at Haywood

Exro Technologies (Exro Technologies Stock Quote, Chart, News, Analysts, Financials TSXV:EXRO) is still down a lot after a short-seller attack earlier in March, but investors should be looking at this as a prime opportunity to load up on the stock before the company commercializes its power electronics tech. So says Haywood Capital Markets analyst Colin Healey, who delivered an update to clients on Wednesday, where he reaffirmed his “Buy” rating and Top Pick status on Exro.

Calgary-based clean tech company Exro, which makes intelligent control solutions for power electronics, announced on Wednesday that it will be opening a new Calgary facility with automotive industry level certifications and the capability to produce up to 100,000 units per year across the company’s Coil Driver products.

Exro said opening the new facility sets the stage for Exro becoming a supplier to the automotive industry and will support the company’s strategic focus on low-volume manufacturing while still using manufacturing partners and licensing contracts for future high-volume manufacturing. Exro aims to have the facility open before the end of the year, with automotive certified production to start by the end of 2022.

“The launching of our new facility in Calgary is a reflection of our dedication to execute on our deliverables,” commented CEO Sue Ozdemir in a press release. “This substantiates our cost-effective automotive market strategy and further establishes Exro’s position as a power electronics company.”

Exro said the new facility will have 37,000 sq ft of production lines, product showrooms and office space and will have a net zero carbon emissions objective, employing solar panels and battery energy storage solutions.

In his report marking the event, Healey recommended investors to take advantage of any weakness in the share price of what he called a high growth clean-energy tech company. The analyst said the short report was “nothing more than an annoyance and distraction, having no impact on our opinion of Exro’s technology, commercial prospects, management or valuation.

Healey said Exro’s risk profile has not changed since it was trading in the $5.50-$6.50 range in February, saying, “Current share price weakness represents an opportunity to add to positions ahead of major upcoming milestones.”

“We continue to like Exro following the recent weakening in the stock price post the release of an unmerited short report earlier this month,” Healey said. “We recommend investors continue to add to positions, taking advantage of the current discount to recent highs as Exro progresses towards formal commercialization. Exro remains a Haywood ‘Top Pick’ for 2021.”

After the short report, which questioned both the value of Exro’s technology and the extent of its industry partnerships, Exro management delivered a detailed, point-by-point response on March 4, on which Healey commented in his own March 5 note, saying,

“Exro’s response does a good job explaining its strategy, focus, important partnerships and upcoming milestones, etc., while discrediting the false claims of the short report related to partnerships, with supporting commentary directly from several of its partners,” Healey wrote.

“The short report’s avoidance of discussion or examination of the highly tenured and high profile executives added to the management and board more recently and its total lack of examination of the validity/performance of Exro’s technology, which is critical to its success, is highly suspect,” Healey wrote.

Along with his “Buy” rating, Healey reaffirmed his in his March 31 report his $8.00 target, which at the time of publication represented a projected one-year return of 112.2 per cent.

By the numbers, Healey thinks Exro will generate full 2021 revenue of $2.4 million, followed by $26.3 million in 2022 and $55.5 million in 2023. On earnings, the analyst is calling for full 2020 EBITDA of negative $6.2 million, negative $0.3 million in 2022 and $8.0 million in 2023.

Healey said with more than $40 million in cash following the recently announced SEA Electric investment, Exro has the resources to accelerate proof-of-concept and deployment across its multiple focus areas on coil driver and battery management.

“We anticipate Exro 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. “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 into deployment of its patented technologies across a wide range of applications.”

Healey noted that Exro is targeting to uplist to the TSX senior board during the first half of this year and to join the NASDAQ potentially by late second half 2021.

“We believe with continued operational execution these moves will open up a larger audience of buyers (especially the NASDAQ) which we believe will provide support to our $8.00 target price/approx. $1 billion valuation,” Healey said.