PyroGenesis Inc T.PYR

SUMMARY of LodeRock Research PyroGenesis Canada Inc: A true

[developbc]

SUMMARY of LodeRock Research PyroGenesis Canada Inc: A true environment pure play

Here is a great summary by another poster from another forum of the PyroGenesis Initiation Report Summary (LodeRock Research)

Analyst: Greg MacDonald

* All figures in CAD unless otherwise stated

Recommendation: Buy; Target Price: +$15/sh

Valuation Assumptions:

• Discounted cash flow analysis using present value in years 1 to 9 and 10x to 15x multiple on terminal value EBITDA (year 10)

• 10% to 11% weighted average cost of capital

• 5% to 6% terminal growth rate

• Implied share price of $12/sh to $18/sh (midpoint of $15/sh)

Revenue and Gross Margin Assumptions:

• Projects PyroGenesis to achieve run-rate revenue of ~$1 billion by the year 2030

• Projects PyroGenesis to achieve run-rate gross margin of ~$600 million by the year 2030

• Projects PyroGenesis earnings-per-share from operations (EPS: diluted) of $1.71/sh by the year 2030

• Estimates 10-year revenue compound annual growth rate (CAGR) of 48%

• Estimates 10-year gross margin CAGR of 50%

• Estimates 10-year EPS CAGR of 60%

Key Summary Points:

• Views PyroGenesis (“the company”) as an environmental pure-play with commercial solutions that can make it a “market leader” in four industry verticals

  • Believes success in any of these key verticals should justify the stock price

  • Sees near term catalysts in aluminum dross and pelletization

  • Views metal powders as longer-term upside within the company due to importance moving forward in additive manufacturing

• Believes the company can take meaningful share of addressable markets collectively worth +$13 billion

• Sees patented solutions as strong potential market leaders in:

  •  

    1. Dross recovery and waste measures reaping improvements of +20% for addressable market of US$2 billion;

  • 2) Reducing iron ore pelletization GHG emissions by +35% for addressable market of US$13 billion;

  • 3) 3D printing high purity and dense titanium powder for addressable market of US$2.5 billion within 10 years (titanium only); and

  • 4) Municipal waste management solutions for addressable market of US+$1 trillion

• Views DROSRITE and NexGen as market leading, with first mover advantage and the potential to be “number one” market share solutions

• Concludes that industrial companies are incentivized to lower carbon footprint and PyroGenesis has multiple solutions that can address environmental challenges in an economically attractive manner

  • Believes the company has focused its capital on solutions with most optimal near term and positive ROI impacts on customers, while being more selective in verticals with significant regulatory and economic hurdles (e.g. waste management)

Additional Summary Points (by Division):

1) DROSRITE

• Believes significant value is created with DROSRITE, as it not only eliminates hazardous waste residues, but improves operating costs by 50%

• Projects leading market share of 35% to 50% (aluminum only) and net margin of 30% to 35%

• Considers most recent 7 system order in 2019 for higher unit price to be indicative of “growing demand” for the solution

• Believes tolling could be economic “game changer” if fully implemented (incl. the residue conversion process PyroGenesis is focused on integrating into their offering)

  • Forecasts tolling fee of US$350 to US$500/tonne

  • Forecasts residue conversion rates of +US$500/tonne, which compares favourably to landfill costs of ~US$300/tonne

• Expects cross selling could take place with regards to plasma torches, but does not reflect that in valuation analysis

2) Iron Ore Pelletization

• Estimates total addressable market of PyroGenesis torches in the iron ore pelletization industry to be in the range of 10,000 torches, with market share assumption of 20% to 30% in the near-to-medium term (~2,000 torches to 3,000 torches)

  • Estimates NPV of torch of US$3 million and gross margin in the 65%+ range (net margin of 30% to 35%)

3) Additive Manufacturing (3D Printing)

• Considers this to be highest potential growth opportunity long-term, as NexGen process could make the company a leader in market share, alongside burgeoning growth in industry

• Forecasts market share of 20% to 30% with net margin of 30% on powder sales

• Estimates addressable market of US$2.5 billion in ten years for titanium powder only

4) Waste Management

• Forecasts a US+$1 trillion market opportunity

• Believes the market opportunity for plasma technology in waste management is more proportional to government subsidization in the near term, as yield economics will play a lesser role until such time they become more favourable

The complete full LodeRock Research coverage on PYR can be found here:
LodeRock Research - LodeRock (loderockadvisors.com)

https://www.loderockadvisors.com/?smd_process_download=1&download_id=2976

[Uncleron]

analysts like this are the tip of the iceberg...he talks about 4 divisions, one of which is a trillion dollar market, I see 2 more trillion dollar markets....to add to these 4....he mentioned capturing market share...very conservative of course, quite like myself , except his 2030 timeline is way out of whack !...by then there will have been many stock splits , like every time the SP adds another

[Uncleron]

this great report is void of the what if's & potential markets....probably not nut butter roasting but maybe an electric plasma jet engine NR with Pratt & Whitney or RR....Plasma technology and AM powders supplied by Pyrogenesis....in 30 weeks from now we will have passed this guy's conservative 2030 numbers...he's only juggling with 4 (fledgling) balls.....I can see at least 8

[Chrisgodfrey202]

If an analist went down the rabbit holes you follow , they would be a laughing stock.  Not saying some of those rabit holes wont become reality but there is no place in a financial industry analysis.  While they undrestimate. You grossly over estimate.  There is no way thev2030 predictions will be surpassed in 3 months.  

[windywolf]

Better green than red I guess.

[developbc]

Both the original poster of this summary and myself both feel these numbers are very conservative as imho can be eclipsed much sooner but the analyst did put target price as +$15/sh as in greater than :)    

[Chrisgodfrey202]

By the nature of financial analysis there is a conservative bias.  The numbers projected will be achieved and surpassed.  They support continued SP growth.  I believe the biggest predictor of base pricing over the next few years is revenue growth. Contract announcements or non announcements, in all divisions,  will cause the SP to bounce around this base price.  Powder is

[dcowan]

The main qualifier in that analysis is that the price target is based on ONE division going... not all FOUR. at least thats the way I read it. 

[Ilocanuck]

If it goes 10... some will be full-fledged PYRONAIRES and if it goes well over 15.. they will become bonafide PRYONAIRENAIRES!!!!LOL.  Just having fun for being old and nowhere to go, so enjoy while we can... Got my PFIZER first shot.. HAVE VACCINE WILL TRAVEL!  sorry, bashers.... Good post DevelopBC...

[Thinkbigsti69]

Yes we will travel this autumn. Also got my PFIZER this tuesday. This play will go much farther than $15 this year.Just a question of time , will have to be patient a little bit more longer. PYR will deliver and probably much more than anticipated. Get ready to be really surprised, Peter has not been sleeping at the wheel.

[developbc]

Thanks llocanuck for your steadfast positive patience as we wait earnestly patiently wait to see this incredible company unfold to it's full potential one day at a time.  Everyday is another day closer to PyroGenesis disruptive tech and engineering to impact many GHG emissions industries helping them go green...voluntarily or by economic force via carbon tax.  Long and strong

[Ilocanuck]

  Faith is what you build on, Fate is your destiny.. What must happen without failure is your fate.  When it is fate, there are no coincidences… The larger the fate, the more you need to walk to reach your destination. So many choices of avenues one can take in a lifetime, no matter how many changes one make, the ultimate outcome is that change can not change one’s fate.  

[Ilocanuck]

If it goes 10... some will be bonafide PYRONAIRES and if it goes well over 15.. they will become full-fledged PRYONAIRENAIRES!!!  Just having fun for being old and nowhere to go, so enjoy while we can... Got my PFIZER first shot.. HAVE VACCINE WILL TRAVEL!    sorry, bashers.... Good post DevelopBC...