Tornado Global Hydrovacs is still a double, Beacon says

Following fourth quarter results he describes as “stronger than expected”, Beacon Securities analyst Russell Stanley has raised his price target on Tornado Global Hydrovacs (Tornado Global Hydrovacs Stock Quote, Chart, News, Analysts, Financials TSXV:TGH).

On April 24, TGH reported its fourth quarter and fiscal 2023 results. In the fourth quarter, the company posted EBITDA of $6.58-million on revenue of $33.2-million, a topline that was up from $20.7-million in the same period last year.

Stanley summed up the quarterly results.

“Earlier today, TGH reported revenue/adjusted EBITDA of $33.3M/$6.6M v. our forecast of $29.7M/$4.1M, and ours is the only current coverage according to FactSet,” he noted. “The Q4 top line included $3.9M in revenue from the sale of IP to the company’s 2nd largest customer. As we had assumed $4.1M in IP revenue, the top line beat reflects stronger-than-expected core business results (hydrovac sales). Gross margins were 456 bps ahead of our forecast, and improved 1,213 bps y/y and 962 bps q/q. The IP sales generated a gross margin of 56%, with the core business producing a GM of 21% v. our forecast of 15%. The gross margin beat/improvement was driven primarily by scale economies on a stronger revenue base, and the GM was the primary driver behind the adjusted EBITDA margin outperformance (594 bps better than forecast).”

In a research update to clients April 24, Stanley maintained his “Buy” rating but raised his one-year price target on TGH from $1.00 to $1.20, implying a return of 107% at the time of publication.

The analyst thinks TGH will post Adjusted EBITDA of $19.0-million on revenue of $126.0-million in fiscal 2024. He expects those numbers will improve to Adjusted EBITDA of $26.0-million on a topline of $138.0-million in fiscal 2025.

“We have increased our PT from $1.00/sh to $1.20/sh on the introduction of our F2025 forecast following much stronger than expected Q4/23 results. As of writing, the stock is up 14% on 35x its normal volume,” Stanley added.