GRA stock is undervalued, Beacon Securities says

Its most recent quarterly results are in bed and Beacon analyst Ahmad Shaath says there is still money to be made on NanoXplore (NanoXplore Stock Quote, Chart, News, Analysts, Financials TSX:GRA).

On September 11, GRA posted its Q4 and fiscal 2023 results. In the fourth quarter, the company posted Adjusted EBITDA of $500,000 on revenue of $33.3-million, a topline that was up 33 per cent over the same period last year.

“I am very pleased to have ended our fiscal year 2023 with our strongest quarter and strongest full year results in our history,” CFO Pedro Azevedo said. “Our record revenues and record adjusted EBITDA were the result of our focus on expanding volume of graphene-enhanced products and improving manufacturing efficiencies. Graphene’s benefits as an additive are real and compelling and more and more customers are recognizing this. We are still in a new material introduction phase, but the direction is clear and momentum is building.”

The analyst says the results bested his expectations by a bit.

“NanoXplore reported Q4/FY23 results that were slightly ahead of expectations highlighted by record quarterly revenue and near-record gross margin. Revenue of $33.3 MM, up 18% y/y, was modestly ahead of our $32.5 MM forecast and consensus $31.8 MM. Adjusted EBITDA was $0.5 MM, better than our $0.2 MM forecast and consensus $0.3 MM,” he noted. “The beat was driven by the higher revenues and strong gross margins (21.5%, +4.1pps vs our expectations and near all-time highs), offset by higher SG&A and R&D costs that were ~+0.7 MM higher than we expected. The company started reporting financials for VoltaXplore as “Battery Cells” segment, for which revenues were $nil and adjusted EBITDA was -$0.6 MM. Thus, excluding the impact from VotlaXplore, normalized adjusted EBITDA for Q4/FY23 would have been $1.1 MM”

In a research update to clients September 12, Shaath maintained his “Buy” rating and one-year price target of $5.00, implying a return of 56 per cent at the time of publication.

The analyst thinks NanoXplore will post Adjusted EBITDA of negative $900,000 on revenue of $123.9-million in fiscal 2023. He expects those numbers will improve to EBITDA of positive $3.6-million on a topline of $136.0-million the following year.