iA Capital Markets analyst Neil Linsdell's view of EnWave Corp (EnWave Stock Quote, Chart, News, Analysts, Financials TSXV:ENW) has dried up a bit. In a Monday report, Linsdell maintained a “Buy” rating but lowered his target price from $1.85/share to $1.65/share for a potential 146.3 per cent return at the time of publication. Linsdell attributed his target drop to revised estimates in his sum-of-the-parts valuation methodology. Vancouver-based EnWave licenses, builds and installs commercial-scale dehydration platforms for companies in the food, pharmaceutical and cannabis sectors, namely the Radiant Energy Vacuum (REV) for dehydrating organic materials. The company also has a subsidiary, NutraDried Food, that makes and sells dairy-based snacks. Linsdell’s latest update comes after the company released its first quarter financial results for the 2022 fiscal year, which were headlined by $6.9 million in revenue, which came in ahead of the iA estimate of $5.6 million and the consensus expectation of $6.7 million while also representing a 47 per cent year-over-year increase. In his analysis, Linsdell noted the strong results from Moon Cheese which helped in spite of having lower REV machine sales in the quarter, as the NutraDried division of the business accounted for $5.4 million in revenue, translating to a 131 per cent year-over-year increase and 78.3 per cent of the overall revenue mix. “The Company generates royalties for products produced using its REV technology, meaning that the growing installed base (specifically of large-scale machines that are generally used for commercial production versus small units that are more suited to product development) provides a growing and relatively stable profit stream,” Linsdell said. Despite the increased costs (input cheese cost was up 35 per cent) and fewer machine sales, Enwave saw improvement in its margins as adjusted EBITDA came in at a $1.2 million loss, ahead of the $2 million loss reported in the same quarter of 2021. Meanwhile, after seeing lower machine sales in the quarter, Enwave modified its guidance for 2022 in relation to sales of its machines, lowering its sales target to 6-8 (from 10) large-scale and 10 (from 15) small-scale machines on account of delays with certain US cannabis customers and as other food customers prioritize projects other than new product development, though Linsdell projects profitability in 2023. Enwave has been relatively busy over the last month, having filed an injunction against its former CEO, Timothy Durance, to keep him and his companies, and anyone acting in conjunction with them, from selling, attempting to sell, supplying, delivering or installing vacuum microwave dryers pending a more complete hearing of EnWave’s injunction application. More recently, the company announced a Technology Evaluation and License Option agreement with Goldencrops Corporation, an ingredient manufacturer in southeast Asia, to put a 10KW REV machine its Douliu City manufacturing facility for the purpose of evaluating its potential for the production of a variety of fruit, dairy and grain products, with Goldencrops aiming to leverage the REV technology to expand its dehydrated ingredient product offerings for domestic and international markets. In keeping with the lower target price, Linsdell lowered some of his financial projections for Enwave in 2022, as he dropped his revenue forecast from $34.2 million to $30.9 million, with the new figure representing a potential year-over-year increase of 16.6 per cent. Looking ahead to 2023, Linsdell forecasts a jump to $44.6 million in revenue (previously estimated at $51.6 million), suggesting a year-over-year increase of 44.3 per cent. On the margins, Linsdell now forecasts negative adjusted EBITDA of $0.8 million in 2022 after previously forecasting $3.1 million to the positive; he now expects the positive turn to happen in 2023 at $4.8 million (previously $8.5 million) for an implied margin of 10.8 per cent. Accordingly, Linsdell introduces an EV/EBITDA multiple projection of 14x in 2023, which he forecasts to drop to 7.1x in 2024. For investors, Linsdell forecasts a fully diluted EPS loss of $0.03/share in 2022 before turning positive in 2023 at a projected $0.02/share, paired with a P/E multiple of 35.4x. “We are encouraged to see the Company continuing to grow its royalties with more REV™ machines sold and installed and expect royalties to be a core part of revenue in the long term,” Linsdell said. “The partnership with Dole remains most promising in the near term, along with new and repeat (although delayed) orders from cannabis clients in the US, which still bode well for increasing royalty payments.” Enwave’s stock price has dropped by 29.5 per cent since the start of 2022, a gradual descent after hitting an early peak of $1/share on January 7, though it has bounced back slightly since falling to a 2022 low of $0.60/share on May 13.