Q3/21 Reporting Recap
Coverage Universe Increasingly Managing Near-term Expectations As Practical Challenges and Limitations to Growth Emerge
TD Investment Conclusion
Outlook Commentary, Conference Call Q&A Increasingly Focused on Near- term Deliverables: If we were to distill the change in broader investor sentiment over the past year into a single theme, it would be the change from excitement around characterizing total addressable market size to the necessary near-term deliverables that are required to justify premium valuation multiples and achieve long-term commercialization targets. To this end, we note that the outlook commentary and conference call Q&A were focused on:
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Expectations related to new or incremental assets and investments, including: feedstock volume expectations for Anaergia's Rialto Bioenergy Facility, order flow at Ballard's Weichai JV, the magnitude of potential development capital opportunities for Greenlane, deliverables for Next Hydrogen's new assembly facility, and incorporating RNG/hydrogen manufacturing at Xebec's recently acquired UECompression facility.
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Margin performance, supply chain, inflation and labour challenges: A combination of these factors is affecting the entire coverage universe to varying degrees.
For more details on the factors described above, we would direct you to our Q3/21 results reports which can be found here: Anaergia (first look, full report), Ballard (first look, full report), Greenlane, Next Hydrogen, and Xebec.
Pace of Capital Deployment Accelerating: In the lead-up to, and throughout reporting, several companies in our coverage universe announced a combination of acquisitions and/or organic capital initiatives, which we summarize on page 2.
Financial Disclosures Not Meaningfully Affecting Share Price Performance:
Overall share-price performance of our coverage universe throughout the Q3/21 reporting time period was positive, with four of the five companies featuring share- price increases over the past month. However, as we highlight on page 3, we do not believe that the quarterly disclosures had a material impact on share-price performance as many of the companies in our Clean Technology coverage regularly press release operational updates.
Our Sector Stance: OVERWEIGHT
TD Clean Technology Industry View & Top Pick Unchanged: We are not making any changes to our estimates, target prices, or ratings with this report and reiterate that Q3/21 results confirmed our preference for companies with differentiated, difficult-to-replicate products and services, with ready-to-commercialize business models and a well-articulated, plausible path to growth and profitability. To this end, our best idea in the Clean Technology space is Anaergia (ANRG-T, SPECULATIVE BUY, $40.00 target price), based on the combination of its broad intellectual property portfolio, strategic focus on municipal waste, the pursuit of a growth-focused infrastructure model, and its ready-to-commercialize business model.