Plastics recycling platform Loop Industries (Loop Industries Stock Quote, Charts, News, Analysts, Financials NASDAQ:LOOP) remains well off its highs of two years prior, but Paradigm Capital analyst J. Marvin Wolff sees plenty of upside over the next 12 months. Wolff reiterated a “Buy” rating on the stock in a Monday report while raising his target price from $5.10 to $6.30 per share, saying strong production economics and a number of joint ventures coming online over the next few years show a company hitting its stride.
Montreal-based Loop Industries has a patented technology to supply CPG companies with recycled PET plastic and polyester fibre. The process breaks down PET waste into base chemicals which are then recombined into virgin-quality PET plastic and polyester. Loop has a strategic partner in SK Geo Centric and together they are building a 70,000 tpa recycling plant in Ulsan Korea.
Loop announced its fourth quarter fiscal 2023 financials on May 18 for the period ended February 28, 2023, posting $172K in revenue and an EPS loss of $0.45 per share and posting a gain of $16.8 million on the sale of its Becancour, Quebec, property. The company finished the quarter with $30 million in cash.
On its commercialization efforts, Loop said the SKGC JV plant will break ground sometime this year and be completed by the end of 2025, with Loop and SKGC now targeting three other facilities in Asia by 2030. In Europe, Loop, SKGC and SUEZ have announced a site selection in the Grand Est region in France, while last month, Loop announced a partnership with CPG company Garnier to launch a 100 per cent upcycled bottle using Loop technology.
“Our achievements in the fourth quarter and full year fiscal 2023 reflect the significant progress Loop Industries has made in realizing our global commercialization goals,” said CEO and founder Daniel Solomita in a press release. “The Asian market represents a tremendous opportunity to deploy Loop’s technology and to create a globally accessible circular economy for PET plastic and polyester fibre.”
In his comments, Wolff said Loop’s balance sheet is solid and with the basic engineering of its plant design now completed the company has reduced its burn rate significantly. Wolff is modelling the roll out of three JV plants in fiscal 2026, 2027 and 2028 and said that with the strong support of SKGC, Loop will be fundable.
“Loop’s patent-protected technology and unique process allow any kind of PET-based plastic waste to be recycled into a branded, food-safe grade of PET from 100% recycled content. In the next decade with regulatory, corporate sustainability and investor ESG targets acting as tailwinds, Loop’s technology has the potential to be a global standard for PET recycling,” Wolff wrote.
Wolff said Loop has strong economics with an expected EBITDA margin of about 50 per cent and that the stock is showing an attractive valuation for investors.
“The company and the stock are not known, hence the share price, in our opinion, is undervalued and represents strong upside potential for investors,” Wolff said.
At press time, Wolff’s new $6.30 target represented a projected return of 103 per cent.