Eight Capital launched coverage of Exro Technologies (Exro Technologies Stock Quote, Chart, News, Analysts, Financials TSXV:EXRO) on Tuesday with a “Buy” rating and $8.00 target. Analyst Sean Keaney said the company’s technology has tremendous potential and the timing of commercialization couldn’t be better.
Exro provides intelligent electrification solutions for motor and battery performance and sustainability. The Calgary-based company has patented software and hardware with in-house design, development, testing and final assembly. Its premier product is the Coil Driver, a motor controller that expands the capabilities of powertrains and dynamically enables multiple power settings in a single motor, allowing for greater efficiency and reduction of energy consumption. The company also has tested its Battery Control Systems (BCS) for optimizing second-life energy storage.
Exro just announced on Tuesday its fourth quarter and fiscal 2020 financials, with management speaking to a busy year in 2020 where the company closed on two short form prospectus offerings for $8 million and $42 million, respectively, and through testing took major steps in getting its products to market.
In the quarterly update, CEO Sue Ozdemir mentioned its letter of intent signed this past quarter with LAND Electric Motorcycles to purchase up to 2,000 Coil Driver units, an expanded strategic collaboration agreement with SEA Electric to showcase the BCS while expanding on the Coil Driver commercialization scope.
“We will be opening a 36,700 square foot facility in Calgary in late 2021 that will be capable of producing automotive compliant Coil Driver units in late 2022,” said Ozdemir.
Chief Engineer Eric Hustedt added, “In a very short time span, our engineers have been able to validate the Coil Driver technology for multiple platforms while continuing to develop the battery technology. We are excited to gear up for standard product designs and series production in the coming year.”
In his coverage initiation, Keaney highlighted what he sees as the advantages of Exro’s patented coil switching technology in the Coil Driver, which he said has a range of applications across electric vehicles.
“We believe these technological advantages will lead to numerous commercial deals and a growing market share out to 2030,” Keaney wrote.
“There has been a big step up in Exro’s number of strategic partners and the company continues to advance and execute on its existing ones,” he said. “It has proof of concept on its BCS and on its Coil Driver and has recently announced commercialization plans with two partners. This could drive a step change in adoption and market acceptance for Exro’s technology and position the company well to partner with companies of increasing size and scale.”
Moreover, Keaney said Exro’s tech is coming to fruition at the right time as electric mobility enters a long-term growth phase and sustainability themes provide a long-term tailwind for the electric vehicle market.
“Sustainability thematics are driving a multi-decade push for vehicle electrification, in our view. The need to improve efficiencies and reduce costs will necessitate and reward innovators such as Exro, and we believe that the company is well-positioned to capitalize on this trend,” Keaney wrote.
Exro’s share price has risen considerably since the stock’s debut on the TSX Venture last September, gaining over 400 per cent between September and mid-February.
Exro has dealt with a rash of volatility in its share price in recent weeks, however, stemming from a short report which appeared in early March. That immediately dropped the stock by about 45 per cent, although it has recovered some of that ground since and is currently up nine per cent year-to-date.
But Keaney sees more upside to the name. At the time of publication, the analyst’s $8.00 target represented a projected 12-month return of 63 per cent.
“We believe that despite the company’s impressive share price performance over the past year, Exro continues to trade at a discount to its intrinsic value. We see exciting potential for its technology, and expect that 2021 will be rich with partnership updates and other positive catalysts for the story,” Keaney wrote.
By the numbers, Keaney thinks EXRO will deliver revenue and adjusted EBITDA of $1.0 million and negative $6.0 million, respectively, in 2021, $8.0 million and negative $5.4 million, respectively, in 2022, and $28.9 million and negative $0.9 million, respectively, in 2023.
As for potential catalysts, Keaney pointed to an announcement of a commercial partnership with a global OEM or Tier 1 supplier, advancement of existing partnerships, addition of new partners, further details on its Battery Control System, up-listing to a senior exchange in either the TSX main board or the NASDAQ and positive regulatory developments surrounding electric vehicles.
For the 2020 year, as reported in its April 6 Q4 and full year announcement, Exro ended 2020 with a net and comprehensive loss of $11.0 million or a loss of $0.12 per basic and diluted share versus a loss of $4.7 million or $0.07 per basic and diluted share for 2019. As of December 31, 2020, Exro had $48.3 million in cash and accounts payable and accrued liabilities of $1.8 million.