Lion Electric Ord Shs LEGWQ

Desjardins : Target at 26$

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The king of the EV jungle—initiating coverage of Lion Electric with a Buy rating and US$26 target price

The Desjardins Takeaway

We are initiating coverage of Lion Electric with a Buy–Speculative rating and US$26 target price. The company is a designer, manufacturer and distributor of all-electric medium- and heavy-duty vehicles. We believe Lion is ideally positioned to succeed given its wealth of experience with all-electric vehicles and extensive portfolio of products already on the road today (vs peers still working on prototypes). Our discussions with ~10 school bus operators support this view.

Highlights

Ideally positioned to lead electric transition in the medium- and heavy-duty vehicle market. While wide adoption of EVs now looks inevitable, we note that the competitive landscape was completely different back in 2008 when Lion was founded. Lion has delivered more than 390 vehicles with over 7m miles driven—a competitive advantage vs many of its peers still working on prototypes.

Strategic market positioning to capture the lion’s share of a large and growing addressable market worth US$110b currently. While Lion has one of the largest purpose-built electric vehicle line-ups in the industry, management strategically targeted the school bus market (annual TAM of US$10b) and the medium- and heavyduty truck segment (annual TAM of US$100b), two markets which are less crowded than the last-mile or transit market.

Significant growth potential ahead as management delivers on its ambitions. We forecast Lion’s consolidated revenue will grow to US$3.6b in 2025 from US$23m in 2020, representing a CAGR of 174%. Meanwhile, we expect management to profitably deliver on its growth ambitions as we forecast the company should turn adjusted-EBITDApositive in 2022 with margin of 19.4% in 2025.

Valuation

12-month target of US$26. Our target is derived from the average of three valuation methods: (1) 2.25x our 2025 sales forecast discounted back three years at a 15.3% discount rate; (2) 12.25x our 2025 EBITDA forecast discounted back three years at a 15.3% discount rate; and (3) a DCF value of US$24.56.

Recommendation

Initiating coverage with a Buy–Speculative rating. We recommend long-term investors buy the shares ahead of potential catalysts (eg potential orders, production ramp-up). We believe the stock could be worth >US$40 by 2023 if Lion is able to deliver on our forecasts.

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That's only the summary. If some investor use Desjardins as brooker, the long version is a 41 pages initial analysis. A good exaustive  document about the company. It's worth the reading.

[Dibah420]

Is there a way to post it here? TIA