Paradigm Capital analyst J. Marvin Wolff has significantly raised his expectations for Canadian graphene company NanoXplore (NanoXplore Stock Quote, Chart, News, Analysts, Financials TSXV:GRA), raising his target price by 30.9 per cent from $10.50/share to $13.75/share in reiterating his Buy stance in his latest report, yielding a potential return on investment of 172%, including dividend.
The self-described global leader in the production of graphene and the commercialization of graphene into the plastic and polymer verticals, NanoXplore has capitalized on the carbon-based compound’s discovery in 2004 to develop a stranglehold in the marketplace, with new product development programs in the automotive, battery, thermoplastic compounding and electronic verticals on the horizon, as well, with six families of patents expanding between 2035 and 2041. With its significant potential and adaptability, Wolff is extremely high on NanoXplore’s capabilities.
“Owing to its recent discovery, graphene has very few end-use markets,” he said. “NanoXplore is aggressively developing end-use markets by using graphene as a performance enhancer for a variety of different plastics with many different end products.”
Paradigm Capital forecasts exponential revenue growth over the next two years, with projections moving from an estimated $71.6 million in 2021 revenue to $179.7 million in 2022, then jumping again to $241.5 million by 2023, with the jumps attributed to NanoXplore finding ways to cut graphene production costs, thereby increasing the margin assumption from $5.00/kg to $7.00/kg.
From an EBITDA perspective, Paradigm Capital projects NanoXplore to break into positive figures by 2022, moving from -$4.2 million this year to $48.5 million by 2022, then up to $71.4 million by 2023. Earnings-per-share is also forecast to yield a return by 2022, moving from -a projected -$0.07/share in 2021 to $.016/share in 2022, then to $0.27/share by 2023.
NanoXplore has secured significant contracts in recent months for its graphene-based products, most notably with Canadian auto parts manufacturer Martinrea International Inc., Tennessee-based Techmer PM LLC, and Brazilian steel producer Gerdau Graphene LTDA, the latter of whom will require tens of thousands of tonnes of graphene in its contract, meaning NanoXplore will need to expand far beyond its 4,000-tpa capacity in its plants in North Carolina and Montreal in order to satisfy customer demand.
However, according to Wolff, NanoXplore management expects to eventually earn bigger contracts than the Gerdau deal.
“We understand there are a handful of potential customers who would require similar large volumes,” he said. “While it is difficult to ascertain who such customers could be, we do know that NanoXplore has been developing graphene-enhanced solutions with customers in several potential large-use verticals, including construction, piping, roofing and automotive.”
Furthermore, NanoXplore’s business model isn’t limited to just graphene production and sales, with revenue streams also presenting themselves in battery materials including graphene and Si anodes, as well as Li-ion battery production through VoltaXplore Inc., a joint venture between NanoXplore and Martinrea International aiming to serve the EV transportation and grid storage markets, with a demonstration plant currently in production, and an aim to be up and running by early 2022.
“Graphene increases the charging speed and capacity of the batteries while improving safety by enabling batteries to work at lower temperatures,” said Dr. Soroush Nazarpour, NanoXplore’s president and chief executive officer. “VoltaXplore will benefit from using NanoXplore’s graphene-enhanced silicon anode formulation and will manufacture cylindrical Li-ion cells. One of the keys to an electric vehicle future is significantly improved batteries, and we believe we can be a part of the solution, both at VoltaXplore and as a graphene provider at NanoXplore. We believe the successful development of graphene enhanced batteries will result in the need for high volumes of graphene powder.”
Ultimately, Wolff notes, the company’s increased growth will depend on its expansion plans, which project to require six months’ lead time on equipment, and another six months to commission, though that window could also decrease over time.
“We maintain our view that valuation at this time is best based on a four-module, 16,000 tonnes of graphene scenario, with a full year of production being FY24 at that level,” he said. “Clearly, as a better picture unfolds of tonnage required by customers, the outlook can be changed easily.”
Shares of NanoXplore closed today down 3.36 per cent to $4.60.