Original-Research: dynaCERT Inc - von GBC AG
Einstufung von GBC AG zu dynaCERT Inc
Unternehmen: dynaCERT Inc
Anlass der Studie: Research Note
Kursziel: 2.20 CAD
Kursziel auf Sicht von: 31.12.2021
Letzte Ratingänderung: -
Analyst: Matthias Greiffenberger, Julien Desrosiers
Half-year figures in line with expectations. Significant sales leaps should
be achieved in the second half of 2020. Target price confirmed: CAD 2.20,
In the first six months of the current financial year, sales revenues
increased significantly by 580.0% to CAD 0.33 million (previous year: CAD
0.05 million). This was due to the good sales start into the 2020 financial
year, although sales and in particular production were significantly
restricted due to the corona crisis. A total of 47 units were delivered in
the first half of 2020. While sales revenues of CAD 0.31 million were
generated in the first quarter of 2020, there were no significant sales
contributions in the second quarter. We had already anticipated this
development, as the production facility had to remain closed. Currently,
production has restarted and we expect significant sales increases in the
second half of the year. dynaCERT has maintained the existing employee
structure even during the COVID crisis and has received governmental
support in the amount of CAD 0.44 million.
As already described in the research report of August 10, 2020, it was
announced on May 11, 2020 that KarbonKleen Inc. has been granted exclusive
dealer rights for the truck sector in the USA. KarbonKleen receives
regional exclusivity and in return has to purchase at least 150,000
HydaGENTM units over the next three years. The first order for 3,000 units
was placed on May 9, 2020.
The company also has a wholly owned subsidiary called dynaCERT
International Strategic Holdings Inc. ('DISH') to realize international
investments in relevant technologies and sales commitments and to implement
the subscription model for the dynaCERT units. Thus, 3,000 units were
committed to KarbonKleen until December 31, 2021 under a subscription
model. Furthermore, dynaCERT indirectly holds 20% of KarbonKleen via DISH.
In our opinion, this is an important investment, as KarbonKleen has secured
exclusive rights for the truck market in the USA. This is likely to be the
most important market for dynaCERT, especially in the near future.
Therefore, a 20% share in the most important target market should be very
important and could turn out to be a very profitable investment.
In addition, dynaCERT has moved up from the TSX Venture Exchange to the TSX
Exchange. We believe this should provide the Company with better access to
capital and increased visibility.
Moreover, within the framework of homologation (homologation is a
supranational system for the approval of motor vehicles and vehicle parts)
of the ABE acertificate of conformity in the United Arab Emirates could be
achieved. Thus, this market should be well accessible now.
Overall, the first half of the year was in line with expectations, and with
the resumption of production it should also be possible to achieve
significant sales increases in the second half of 2020.
Production was stopped in the first half of the year and should have
resumed in the meantime (August 2020). The company has also started
offering leasing solutions. As a result, sales revenues will be lower in
the short term, but the margin will be significantly higher, as recurring
sales can be booked almost entirely as revenue once the break-even point
has been reached.
With dynaCERT technology, there should be considerable savings of diesel,
which should lead to strong cost reductions. Companies with a large number
of diesel engines, such as logistics companies and mining companies, will
particularly benefit from this. The fact is that such companies rely
heavily on new technologies for ongoing cost reduction. For example, there
is an adoption explosion as soon as a new technology is used. The
background to this development is likely to be that market participants who
use the new technology work much more efficiently and either drive other
market participants out of the market or indirectly force them into
adopting the new technology. This is particularly evident in the
development of trailer aprons, where market penetration began in 2008.
After two years, the adoption rate was already over 60%.
We assume that, on the one hand, the effectiveness of the dynaCERT
technology is significantly higher than that of trailer aprons but, on the
other hand, the costs are also significantly higher than for trailer
aprons. According to the Canadian Council of Energy Ministers, trailer
aprons cost between 1500 and 2500 CAD and achieve fuel savings of between 4
and 7%. The dynaCERT technology has shown varying degrees of fuel savings,
often between 9% and 15%. This technology, with a sales price of CAD 6000,
would be roughly equivalent to the price/performance ratio of trailer
On the basis of this model, we have prepared our medium-term sales
forecast. We expect sales to increase significantly to CAD 32 million in
2020, followed by CAD 200 million in 2021 and CAD 350 million in 2022. In
view of our assumption regarding comparable developments in trailer skirts,
our model can still be considered conservative. At the same time, the
management is also relying on leasing models in addition to selling the
systems. Leasing should enable the company to penetrate the market much
faster, as this is much less capital intensive for customers. However, in
the short term, this leads to lower sales at dynaCERT, as the annual
leasing rate is lower than the one-time sales price. In the long term, the
proportion of recurring sales will increase, which should also make a high
contribution to earnings.
Anticipated order fulfillment is approximately 2,500 units and a further
3,000 units in the subscription model. We assume that one unit will be sold
at a price of CAD 6,000 and that the leasing will pay for itself in about
two years. A capacity limit should not be a limiting factor for the coming
years. Currently, the company can produce about 2,000 units per month, or
24,000 units per year, which corresponds to a turnover of about 144 million
CAD. This would correspond to one production shift. With three shifts, the
capacity could be tripled, i.e. increased to 432 million CAD turnover. We
assume that the production line can also be expanded in the medium term, so
that no capacity limits are reached.
The high sales growth should be supported by external sales. The high sales
growth should be supported by external sales through the company's
extensive global dealer network that now exceeds 40 dealers. dynaCERT has
dealers in Canada, the USA, Mexico, South America, Europe and the Middle
East and India. dynaCERT also recently announced a cooperation with
Alltrucks in Europe which is anticipated to facilitate installation and
dynaCERT has announced that it is now active in the FreightTech market.
FreightTech should be an excellent fit for dynaCERT's portfolio as it
addresses very similar customers. This should allow the company to create
even more attractive offerings for customers, which could further
accelerate the pace of growth in the future.
Our current sales forecast does not yet take into account the enormous
potential of CO2 certificates 'Carbon Credits'. This business area could be
even more profitable in the future than the classic sale of dynaCERT
equipment. By reducing the fuel consumption of diesel engines while at the
same time reducing carbon emissions and other pollutants, the dynaCERT
technology can become very lucrative with the world-wide market acceptance
of the CO2 certificates. For example, it is estimated that a class 8 truck
can generate up to EUR2,500 per year (3,918 CAD/year) in emission credits at
a market price of EUR25/t CO2. We see this step as the next stage of
development for the company and this would again lead to a significant
increase in sales revenues.
On the earnings side, we expect dynamic development since, on the one hand,
the gross margin is very high at 50% and, on the other hand, the leasing
model should generate high recurring revenues at very low variable costs.
We assume that costs will remain largely stable and develop
disproportionately low. In addition, the gross margin should continue to
rise in the medium term, as the unit costs for an increasing number of
units should continue to fall. In the R&D area, we continue to expect cost
increases, as technology is expected to continue to develop continuously.
Furthermore, we assume that business development costs will also continue
In view of the as-yet-unanticipated income from emission credits, we have
prepared an income forecast based on the units sold. Currently, we expect
after-tax earnings of CAD -1.34 million in the current fiscal year 2020 and
CAD 21.76 million in 2021, followed by CAD 40.10 million in 2022.
Die vollständige Analyse können Sie hier downloaden:
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Date and time of study completion: English: 05.10.2020 (08:45)
Date and time of first transmission: English: 05.10.2020 (10:00)
Target price valid until: 31.12.2021
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