Thermal Energy International is a buy, Beacon says

Beacon Securities analyst Russell Stanley maintained a “Buy” rating and $0.30 target price for Thermal Energy International (Thermal Energy International Stock Quote, Chart, News, Analysts, Financials TSXV:TMG) in a July 10 report, after the company announced $5.5-million in new business over the past week.

Thermal Energy International designs custom energy efficiency and emissions reduction systems for large industrial clients, including Fortune 500 companies. Its systems are used in sectors such as food and beverage, pharmaceuticals, pulp and paper, chemicals, and petrochemicals. The company has supplied systems to about 50 major firms to help cut fuel use and lower carbon emissions.

The latest order, a $1.4-million turnkey heat recovery project, comes from a European malted barley producer, marking continued growth in the food-and-beverage and pharmaceutical sectors. While Stanley left his estimates unchanged, he called the contract wins positive and noted the stock is approaching a key technical resistance level with strong momentum.

William Crossland, CEO of Thermal Energy International said in a press release about the most recent order, “This customer produces high quality malted barley, primarily for European breweries – a market vertical we have had much success with over the years, including delivering energy saving projects across multiple sites at four of the top five breweries in the world. Our proprietary energy efficiency solutions offer malt barley producers, breweries, and bottling operations a clear path to lower energy costs, reduced emissions, and more sustainable production.”

Stanley said the company’s latest project win follows the completion of a project development agreement.

“The customer supplies European breweries, so this represents another win in the food-and-beverage vertical, which TMG has had strong success in, including work for four of the five major breweries globally,” he said.

He added that the deal follows a major pharmaceutical contract announced earlier this month. That $4.1-million turnkey heat recovery project adds to two earlier phases: a $500,000 engineering contract in February and a $1-million equipment order in June.

“This brings the total project revenue to $5.6M, making it one of the largest single projects TMG has worked on in recent memory,” Stanley said. “This development reflects the company’s ability to deepen its penetration with another major pharma company and continue its expansion beyond its historic strength with food-and-beverage customers. We are also encouraged by TMG’s ability to convert that original $500k engineering project into a full $4.1M installation order, given the components have traditionally been packaged together into one contract. This pharma company has several other manufacturing sites globally, so a successful installation positions TMG well to win further business from this customer.”

Since early June, the company has repurchased and cancelled about one million shares under the normal course issuer bid announced in late May.

“We view the activity favourably. The company can repurchase up to 7.6M additional shares under its existing plan.”

Stanley estimates that Thermal Energy International will generate $0.6-million in Adjusted EBITDA on revenue of $29.7-million in fiscal 2025. He expects those figures to improve to $4.1-million in Adjusted EBITDA on revenue of $40.1-million in fiscal 2026.

Stanley said the company is trading at 7.7 times his forecast for 2025 EBITDA, adjusted to match the calendar year since Thermal Energy’s fiscal year ends in May.

“This represents a 60% discount to the 23.1x at which Trane Technologies trades,” he said. “Consensus estimates for TT contemplate 13% EBITDA growth for its F2025, whereas we expect 82% for TMG’s C2025. Potential catalysts include contract wins, the Q4 results (likely September) and M&A activity.”

-30-