Loop Industries is practically a double, says Roth

Roth Capital Partners analyst Gerry Sweeney is keeping a bullish stance on Canadian cleantech company Loop Industries (Loop Industries Stock Quote, Charts, News, Analysts, Financials NASDAQ:LOOP). The analyst reiterated a “Buy” rating on the stock in a Friday report, saying the company’s plastics recycling tech will be in high demand.

Loop Industries reported its first quarter fiscal 2024 financials on July 12, showing negligible quarterly revenue and an adjusted EBITDA loss of $6.6 million. EPS was negative $0.15 per share and total operating costs were $7.0 million.

The company has had a number of significant developments of late. In April, Loop entered into a joint venture with South Korea’s Geo Centric to build four commercial manufacturing facilities in Asia by 2030, starting with one in Ulsan, South Korea, which is scheduled to break ground later this year and completion has been pegged at the end of 2025.

“We are very excited to expand our technology into the Asian market to support our global brand customers by supplying them with Loop branded PET resin and polyester made from 100 per cent recycled content,” said Loop founder and CEO Daniel Solomita in a press release.

Over the fiscal Q1, Loop also signed its first customer LOI for the Ulsan facility with On Shoes, a Swiss shoe company which is already a customer of Loop’s Terrebonne facility.

Sweeney said Loop management has indicated that other LOIs for the Ulsan plant are coming in the near term, as it is currently finalizing contracts with four other customers. The analyst said customer demand from apparel companies is especially strong, as polyester material remains a challenge to recycle due to the variety in materials.

“Loop has demonstrated its technology can use polyester, which provides a few advantages,” Sweeney said. “Polyester remains an extremely large market with limited recycling offerings, which provides a very cheap input for LOOP. In addition, LOOP provides a true ‘circular’ option for apparel companies.”

Sweeney said he expects project financing for the Ulsan plant will likely come into place this fall, giving investors a better view on LOOP’s own required equity contribution to the JV.

“LOOP likely has several levers to provide equity investment including injections from strategic partners and potential other equity offerings. However, the key is Ulsan is on track for construction, while LOOP continues to develop additional offtakes and other partnerships with leading consume-focused companies,” he said.

With the “Buy” rating, Sweeney maintained a 12-month target of $6.00 per share, representing at the time of publication a projected return of 97 per cent.