With multiple commercial partners validating its technology and the company well-positioned in the EV space, Canadian cleantech name Exro Technologies (Exro Technologies Stock Quote, Charts, News, Analysts, Financials TSX:EXRO) is worthy of a “Speculative Buy” rating, according to Laurentian Bank Securities analyst Nauman Satti. Initiating coverage on Thursday, Satti started EXRO off with a $5.50 price target which at press time represented a projected one-year return of 82 per cent.
Calgary-based Exro Technologies develops power electronics for motors and has its patented Coil Driver currently in the testing stages with various partners. The Coil Driver works to improve torque and speed capabilities for electronic vehicles, while Exro’s other product in development, the Battery Control System, is geared for reusing vehicle batteries for second-life applications.
Exro was listed on the TSX Venture in September 2020 and quickly started climbing, effectively tripling in value in its first three months. The stock really took off in early 2021 but a general pullback in renewables and cleantech stocks impacted EXRO starting in February, as did a short-seller report that arrived in early March. Year-to-date, the stock is currently down about 30 per cent.
But Satti is bullish on the company and stock, saying, “Exro should benefit from the growing trends of electrification, as the company has positioned itself in this critical space with smart technology products that can cater to a wide range of electric mobility applications from electric scooters (2&3-wheelers), ATVs, light-duty vehicles, electric buses to heavy-duty electric trucks.”
“Although the technology is in the development/testing phase, initial results have shown success for a pathway to revenue. We expect commercialization/ production with current partners or an announcement of new partnerships with Tier-1 auto-part suppliers to act as a catalyst for the stock price,” he wrote.
Along with praise for Exro’s technology, Satti said the company’s partnerships have pointed to early product success, where Exro has so far partnered with nine companies including Linamar Corp to validate the advantages of its tech.
“Once the testing phase is complete and the technology is validated, Exro is expected to commercially manufacture the technology for its partners,” Satti said.
“Exro is currently focused on the automotive traction inverter industry (US$7.7B market by 2025) as it offers the most value for the technology. However, future opportunities can come from other markets (snow machines, motorcycles, ship drives, heavy machinery, and industrial appliances),” Satti said.
By the numbers, the analyst is forecasting $84,000 in revenue for 2021, rising to $8.2 million in 2022 and $28.9 million in 2023. By 2025, Satti is forecasting $94.9 million. On adjusted EBITDA, the analyst is calling for negative $19.5 million in 2021, negative $22.8 million in 2022 and negative $19.3 million in 2023. Satti is forecasting positive EBITDA by 2025 at $9.2 million.
“Our target price multiple of 13x is reflective of the large growth opportunity as Exro can transition into other markets once it has established its product in the automotive sector. In addition to the ‘Exro Drive’ division, Exro has a second division ‘Exro Energy,’ focused on developing a second life for batteries, alongside offering storage solutions,” Satti wrote.
“Our Speculative Buy rating is reflective of the large execution risk, as the technology is still in the testing phase with no other revenue pipeline. Similarly, the overall risk profile for such an investment is high, particularly for the value investors,” he said.
Exro announced last month that employees have moved into the company’s new research and development facility in Mesa, Arizona.
“Moving into our Mesa facility today marks another milestone for the company this year,” said Sue Ozdemir, CEO, in a press release. “With our doors officially open for business, we expect to increase our testing capacity and scale to meet the demand we’re creating. We can’t wait to welcome our partners, customers and shareholders to tour our state-of-the-art innovation and development facility early next year.”
Exro also reported its third quarter financial results last month, saying its focus over the quarter had been on expansion of its technology applications and business services. On the former, Exro earlier announced a new application for the Coil Driver which has the potential to “dramatically reduce the cost and complexity associated with deploying electric vehicle infrastructure at scale.”
As for the Q3 numbers, Exro posted a loss of $7.6 million for the quarter and increased its R&D costs from $1.8 million to $2.0 million.
“Exro has been firing on all cylinders over the summer,” said Ozdemir in a press release. “We have a number of development and expansion projects underway, and all of our resources are now running at full capacity. In addition to the recent Coil Driver patents filed in July 2021, AVL, an independent third-party firm, confirmed that our coil switching technology optimizes the performance of electric motors. Further, not only have we completed the first vehicle integration of the Coil Driver with Potencia and Zero Motorcycles, but the team has also made significant progress in terms of size and power density of the Coil Driver products.”