Beacon Securities is staying bullish on water treatment solutions company H2O Innovation (H2O Innovation Stock Quote, Chart, News, Analysts, Financials TSXV:HEO). Analyst Gabriel Leung delivered a corporate update on Tuesday where he kept his \u201cBuy\u201d rating and increased his target price to $4.00 (was $3.00), saying the company\u2019s new tuck-in acquisition is looking good. Quebec City-based H2O Innovation designs, builds and operates custom, state-of-the-art integrated water treatment solutions based on membrane filtration technology for municipal and industrial clients, along with marketing a range of specialty chemicals for water treatment and conditioning. The company announced on Monday it has acquired the remaining 76 per cent of issued and outstanding shares of Madrid, Spain-based Genesys Membrane Products (GMP). H2O Innovation had previously taken a 24-per-cent ownership stake in the company through the acquisition in November 2019 of UK-based Genesys. Starting out as a technical service partner for Genesys, GMP has developed specialized membrane autopsy capabilities and also sells specialty chemicals, filters and complementary products to the membrane industry. GMP\u2019s revenue for 2020 was about $7.75 million, and 24 per cent of its EBITDA has already been accounted for in H2O\u2019s numbers as a share of profit in an associate. H2O said with the close of the deal it will increase the company\u2019s EBITDA on a proforma basis by more than ten per cent. H2O president and CEO Fr\u00e9d\u00e9ric Dugr\u00e9 said acquiring the whole of GMP is the next logical step for the company in becoming \u201cthe world\u2019s largest membrane specialty chemicals and associated services supplier\u201d sold through a large distribution network. \u201cGMP\u2019s laboratory is globally recognized as the preeminent membrane autopsy facility in the industry and will support our Genesys and PWT teams in their sales efforts going forward. This laboratory has the experience and expertise of thousands of membrane autopsies performed over the years,\u201d Dugr\u00e9 said in a press release. H2O Innovation has seen its share price take off over the past few months. HEO doubled its value in 2020, finishing up 106 per cent, while so far in 2021 the stock is up a further 50 per cent. Looking at the GMP deal, Leung said at about $7 million HEO paid 6x EBITDA for the 76-per-cent stake (H2O paid $2.4 million at the close of the acquisition with earnouts coming over three years based on GMP\u2019s 2021 and 2022 EBITDA. \u201cGMP\u2019s presence in Santiago, Chile, through its wholly owned subsidiary Genesys Membrane Products Latinoamerica Limitada, also positions HEO to better access the Latin American membrane chemical market, in particular the mining industry. GMP recently won a two-year contract for membrane cleaning chemicals and site services of approximately $3 million for a large mining customer in Chile,\u201d Leung wrote. \u201cBottom-line, we believe this transaction will be an accretive one for HEO, which enhances its technical expertise and also geographic footprint, particularly in Latin America,\u201d he said. On H2O, Leung said its strong organic growth prospects as shown from its performance during the pandemic and via strong macro tailwinds along with its healthy M&A pipeline and \u201cimpressive\u201d operational performance have all contributed to his target raise, which at now 2x fiscal 2022 EV\/Sales is in-line with its peer group. \u201cWe believe the company continues to explore new opportunities in its O&M and Specialty divisions, which should further augment its recurring revenue base. With the company now operating at a net debt ratio of sub-1x and generating strong FCF, we also believe it is in good position to move forward with acquisitions with minimal dilution (depending in the size of the transaction),\u201d Leung wrote. Looking at H2O\u2019s financials, Leung is calling for the company to generate fiscal 2021 (year end June 30) revenue and adjusted EBITDA of $147.7 million and $14.4 million, respectively, and fiscal 2022 revenue and adjusted EBITDA of $161.0 million and $17.3 million, respectively. At press time, the analyst\u2019s new $4.00 target represented a projected one-year return of 31 per cent. In early December, H2O announced a three-year strategic plan, aiming for between $175 and $250 million in revenues by the end of its fiscal 2023 with adjusted EBITDA margins reaching above 11 per cent. The company said its pipeline of acquisition targets is \u201crich in opportunities\u201d and is diversified in terms of company size and profile, with H2O aiming to complete between two and four acquisitions over the next 30 months. The company said it intends to do its M&A without share dilution unless required for a significantly transaction in terms of size. H2O said the global water market, currently at $842 billion, is expected to grow annually by between five and 14 per cent, with fundamental drivers coming in the form of population growth, tightening regulations, water scarcity and growing demand from agriculture and industry. \u201cTo develop the three-year strategic plan, the Corporation\u2019s executive team, in collaboration with the business line managers, has identified specific sub-markets and sub-segments to determine a current addressable market for H2O Innovation in the range of $4.5 billion. This addressable market is where the Corporation intends to continue its growth during the next three years, both organically and through mergers and acquisitions,\u201d the company said in a December 8 press release.