Tornado Global Hydrovacs is a buy, Beacon says

The company’s second quarter is in the books and Beacon Securities analyst Russell Stanley is still liking Tornado Global Hydrovacs (Tornado Global Hydrovacs Stock Quote, Chart, News, Analysts, Financials TSXV:TGH)

On August 17, TGH reported its Q2, 2023 results. The company reported EBITDA of $2.01-million on revenue of $23.5-million, a topline that was up 76 per cent over the same period last year.

Stanley broke down the quarter.

“TGH reported Q2 revenue/adjusted EBITDA of $23.5M/$2.0M v. our forecast of $21.2M/$1.9M. Revenue was 11% above forecast, which contemplated a flat Q2 after a stronger-than-expected Q1,” the analyst said. “Revenue improved 75% y/y and 12% q/q. Hydrovac Sales improved 84% y/y and 12% q/q to $21.9M, with Parts & Services contributing $1.6M in revenue, in line with Q1 levels. Gross margins were 83 bps below our forecast, but still improved 49 bps q/q. Margins continue to be negatively impacted by increased material/labour/freight cost inflation, but the company is benefiting from sourcing parts more globally. The gross margin improvement drove adjusted EBITDA margin growth of 68 bps q/q. The company continues to generate positive operating cash flow before (OCF of $1.5M) and after working capital (CFO of $0.5M), and with nominal CAPEX requirements, this translated to positive free cash flow of $0.3M.”

In a research update to clients August 18, Stanley maintained his “Buy” rating and one-year price target of 89 per cent at the time of publication.

The analyst thinks Tornado Global Hydrovacs will post Adjusted EBITDA of $9.0-million on revenue of $95.0-million in fiscal 2023. He expects those numbers will improve to EBITDA of $19.0-million on a topline of $118-million the following year.