EXRO has an upside of 520 per cent, Haywood says

Colin Healey of Haywood Capital Markets is still buzzing about EXRO Technologies (Exro Technologies Stock Quote, Chart, News, Analysts, Financials TSXV:EXRO), maintaining a “Buy” rating and target price of $8/share for a projected return of 520.2 per cent in an update to clients on Tuesday.

Incorporated in 2014 and headquartered in Calgary, Exro Technologies Inc. focuses on developing and commercializing patented coil driver technology and proprietary system architecture for power electronics. In particular, the company is focused on its patented Coil Driver technology, which could dramatically reduce the cost and complexity associated with deploying electric vehicle infrastructure at scale.

Healey’s latest analysis comes after EXRO released high-level performance data from its collaboration with Zero Motorcycles.

“Exro continues to demonstrate through various collaborations and partnerships, that its Coil Driver technology has the ability to significantly increase power and torque when integrated into OEM powertrains in various vehicle applications,” Healey said. “Although we would always like to see more detailed data than the high-level summary numbers provided in the press release, the peak power and torque improvements over the OEM configuration managed by Exro’s Coil Driver integration are compelling and reassuring as they apply to the commercial case for the tech.”

The collaboration between Exro and Zero Motorcycles was previously announced in October, and the data released in the report contained side-by-side bench-level testing of Exro’s 100 Volt Coil Driver and Zero Motorcycles’ OE premium electric powertrain, having previously demonstrated Coil Driver’s ability to optimize low-end torque and high-end speed when combined with the Zero motor powertrain.

The testing began with simulations conducted with Ansys software to predict expected performance, then shifted to a dynamometer for the actual testing to determine actual observed torque and power outcomes.

All told, the dynamometer testing showed the Coil Driver produced 90kW of peak power, a 28.4 per cent increase in relation to Zero’s ZF75-10 Base System on its own, while also yielding a 20.1 per cent increase on peak torque with a reading of 227Nm, with both numbers coming in within a four per cent deviation of Exro’s simulated results of 93.3kW of peak power and 228Nm of peak torque.

Healey noted that Exro and Zero Motorcycles continue to talk about next steps in the collaboration process, including production, while also stating from conversations with Exro that the company has been doing in-vehicle testing since December.

Looking ahead, Healey identifies the in-vehicle testing as a catalyst to provide real-world analysis, while future commercial production announcements with one of its collaborative partners would provide firm visibility on revenue.

“Our work with Zero is an excellent demonstration of Exro’s electric powertrain expertise and marks a major milestone on our path towards becoming the leading power electronics provider for the electric motorcycle market,” said Sue Ozdemir, CEO of Exro in the company’s March 22 press release. “The results are further proof of Exro’s ability to improve performance and efficiency in low voltage electric vehicle applications and reinforce great confidence in our engineering and development teams’ ability to deliver superior technology to the electric mobility markets. We’ve delivered on our technology commitments and are moving forward to the next phase of collaboration for commercialization with Zero.”

Healey projects significant growth for Exro in his financial projections, with his revenue projection coming in at $26.3 million for 2022, then taking another shot upward to a projected $55.5 million in 2023, good for a potential year-over-year increase of 110 per cent.

From a valuation perspective, Healey foresees the company’s EV/Revenue multiple coming in at 5.9x in 2022, then decreasing to a projected 2.8x in 2023.
Based on a consistent gross margin of 40 per cent, Healey projects the company’s gross profit to be $10.5 million in 2022, then to a projected $22.2 million in 2023.

Meanwhile, Healey projects the company’s EBITDA to turn positive in 2022 at $600,000 for an implied margin of 2.3 per cent, with further projected growth to $8.9 million in 2023, implying a significantly wider margin of 16 per cent.

“Today’s news provides further validation of Exro’s Coil Driver system use case in the lower voltage light electric vehicle segment,” Healey said. “We continue to like Exro and expect further news flow to incrementally move the stock higher and recommend adding to positions as the Company progresses towards formal commercialization of multiple technologies.”

Exro’s stock price has tumbled to a 60.8 per cent loss over the course of the last 12 months, punctuated by a 55.1 per cent loss since the start of 2022. Since hitting a 52-week high of $4.95/share on April 5, the stock has had its share of ups and down, though its most recent downturn began at the start of this year, eventually hitting a 52-week low of $1.19/share on February 24.