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Canaccord Genuity analyst Yuri Lynk sees “a compelling growth profile ahead” for Exro Technologies Inc. (
) with its proprietary power control technologies for electric motors and batteries on the cusp of commercialization.
In a research report released Monday, he initiated coverage of the Calgary-based company with a “buy” recommendation, believing it is “poised to benefit from fast growing markets.”
“Exro’s EV traction inverter, called the Coil Driver, expands the capabilities of the industry standard inverter, allowing it to provide two separate speed-torque profiles from the same motor,” said Mr. Lynk. “This effectively expands the capabilities of the electric motor throughout the speed range allowing EV manufacturers to employ smaller or fewer motors, saving costs and/or increasing efficiency.
“The Coil Driver technology has been significantly de-risked and is ready for commercialization due, in part, to an important endorsement from tier-1 automotive supplier Linamar. On May 15, 2023, Exro and Linamar signed a definitive agreement to serially produce and commercialize their integrated electric beam axle product for Class 3-6 commercial vehicles. This comes after successful testing and validation by Linamar of the Coil Driver product samples delivered in Q4/2022. The agreement contemplates the start of series production by Q4/2024 and includes annual commercial volume targets that build to 25,000 units per annum by 2027, which we estimate could generate $80-million of annual revenue. Additionally, Exro has strategic partnerships with Wolong Electric (a top-three global motor manufacturer), a large European tier-1 automotive supplier, and a European automotive OEM that could represent large volume commitments if commercialization is reached with each partner.”
With the Coil Driver set to commence production in the third quarter and its Cell Driver slated for Start-of-series production, Mr. Lynk said he expects a “steep revenue ramp” through his forecast horizon.
“Backed by Master Service Agreements (MSAs) and purchase orders in hand, we estimate revenue increases 76 per cent in 2023 to $4-million before surging to $64-million in 2024 and $132 million in 2025 with EBITDA breakeven mid-2025,” he said. “With a total addressable market of US$150 billion that we expect to grow at a compound annual growth rate (CAGR) of 13 per cent for the next seven years, we see attractive growth potential in Exro.”
“We see good upside potential to our financial forecast. For example, our model doesn’t include any Cell Driver sales, although we hope to get better visibility on what this product’s sales ramp-up might look like later this year. As for the Coil Driver, Exro has strategic partnerships with Wolong Electric (a top three global motor manufacturer), a large European tier-1 automotive supplier, and a European automotive OEM that could represent large volume commitments if commercialization is reached with each partner.”
Projecting it well-funded through the end of 2025 and emphasizing the importance of its “highly experienced team in power electronics,” Mr. Lynk set a target of $2.75 per share. The average target on the Street is $3.08, according to Refinitiv data.