Metatek-Group is a buy, this analyst says

Beacon Securities analyst Russell Stanley initiated coverage of Metatek-Group (Metatek-Group Stock Quote, Chart, News, Analysts, Financials TSX:MTEK) with a “Buy” rating and C$9.00 target, implying a return to target of 80%.

Metatek is a U.K.-based geophysical services company that provides high-definition subsurface mapping of strategic and critical mineral resources for exploration and development.

“We view MTEK as a compelling investment opportunity,” Stanley said in his April 24 initiation.

He said demand is being driven by governments seeking better visibility into domestic resource potential, both to capture economic value and protect supply chains. The global geophysics market was valued at nearly $16-billion in fiscal 2024 and is expected to grow at a 6.3% CAGR to more than $29-billion by 2034, but he expects Metatek to grow much faster.

“The recent conflict in the Middle East has also served as a harsh reminder as to how vulnerable global supply chains are for many raw materials, beyond just oil and gas,” Stanley said.

He said Metatek’s backlog has risen 50% since March and 214% since the end of fiscal 2024 to $69-million, including $23-million in new awards during March. The largest of those, at more than $20-million, was repeat business from a major African client. He said every client that has completed a pilot or project using Metatek’s flagship eFTG system has at least begun negotiating for more work.

Metatek generated fiscal 2025 revenue of $23.7-million and Adjusted EBITDA of $9.2-million, a 39% margin, up 99% and 333%, respectively. With a second system deployed this year and a third expected early next year, Stanley forecasts a revenue and Adjusted EBITDA CAGR of 59% and 70% through fiscal 2027.

Proceeds from Metatek’s recent C$35-million IPO will fund initial milestone payments on a fourth and fifth system. Full use of all five systems could support annual revenue of $125-million and Adjusted EBITDA of $63-million, or a 50% margin.

Stanley said Metatek also benefits from long sales cycles, repeat government customers and equipment supplied by Lockheed Martin under a right of first refusal expected to convert into a seven-year global exclusivity agreement. Combined with long production timelines, he believes that could give Metatek effective exclusivity for about 10 years.

His C$9.00 target is based on 12.5x fiscal 2027 estimated Adjusted EBITDA of $27-million, a steep discount to BlackSky Technology at 36x.

“We believe MTEK offers superior top-line growth and margins, with our multiple discount reflecting trading liquidity,” Stanley said.

The analyst expects Metatek to generate $16-million in Adjusted EBITDA on $38-million in revenue in fiscal 2026, improving to $27-million in Adjusted EBITDA on $60-million in revenue in fiscal 2027.

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