Beacon Securities raises target on Kraken Robotics

Kraken Robotics (Kraken Robotics Stock Quote, Charts, News, Analysts, Financials TSXV:PNG) scored a target raise from Beacon Securities after reporting third quarter earnings. Beacon analyst Gabriel Leung delivered a note to clients on Tuesday where he maintained a “Buy” rating on the stock while lifting his target price from $0.85 to $0.90 per share, saying a large deal pipeline should power Kraken through the upcoming year.

Marine tech company Kraken Robotics, which supplies ultra-high resolution, software-centric sensors and underwater robotic systems, announced its Q3 financials on Tuesday, coming in with revenue more than doubling to $12.3 million compared to $5.1 million a year earlier. Adjusted EBITDA was $1.8 million versus a loss of $1.3 million a year ago, and the company finished the quarter with cash of $4.7 million compared to $1.7 million a year ago. 

The company said the revenue rise came from deliveries to the Royal Danish Navy on mine-hunting systems, contribution from last year’s acquisition PanGeo and the delivery of its SeaPower battery products. Management reiterated its 2022 full-year guidance, expecting revenue of between $36 and $42 million and adjusted EBITDA between $5 and $7 million.

“We continue to report strong financial results during 2022 driven by our core products and service offerings. We are seeing market momentum driven by the geopolitical landscape and upgrade cycles in defence as well as strong growth in offshore renewable and offshore oil and gas. Combined with yesterday’s announcement of an initial $14 million subsea battery order from a confidential customer, we feel we are well positioned for continued strong growth in 2023 onwards,” said CEO Karl Kenny in a press release.

The Q3 top and bottom lines outperformed, according to Leung, who said the $12.3 million in revenue came in ahead of his estimate at $10 million and adjusted EBITDA at $1.75 million was also above his call at $1.1 million. Drilling down, Leung noted Kraken’s Product segment revenue at $7.6 million and Services revenue at $4.7 million compared to his forecast at $7 million and $3 million, respectively.

On management’s guidance, Leung said he thinks there’s “a high degree of visibility” to it, given the company’s results to date as well as its backlog of signed deals.

“We understand the pipeline of opportunities remains robust, which should help to drive growth in both PanGeo and PNG’s core Product business (over and above CY22’s expected record levels),” Leung said.

For the full year, Leung thinks Kraken will generate $40.6 million in revenue and $5.0 million in adjusted EBITDA, moving to $53.0 million in 2023 revenue and $8.0 million in EBITDA. At the time of publication, Leung’s new $0.90 target represented a projected one-year return of 70 per cent.