EQTEC PLC (LON: EQT)  

EQTEC PLC (LON: EQT) is an FTSE AIM All-Share index listed Company focused on sustainable waste-to-energy projects. Moreover, EQT uses its gasification technology to produce green energy from 50 different kinds of feedstocks. Furthermore, it collaborates with EPC (“Engineering, Procurement and Construction”) contractors to develop sustainable waste elimination and green energy infrastructure.  

Clean Energy Industry Outlook

According to industry experts, the global renewable energy market is anticipated to increase by around 22.7%, from USD 184.3 billion in 2020 to USD 226.1 billion by 2021. Moreover, declining oil consumption would support utility players to source their power from renewable energy. The Asia Pacific would remain the largest market for renewable energy.

Growth Prospects

• Acquisition of Two Plants in Croatia: Recently, EQT had completed the acquisition of two 1.2 MWe waste-to-energy gasification plants in Karlovac, Croatia and Belišce, Croatia. Both these plants are expected to produce around 1.2MW green electricity from locally sourced wood chips & forestry waste biomass every year.

• Collaboration With Kibo Energy: EQT had partnered with Kibo Energy to develop the proposed 25 MWe Billingham waste gasification and power plant in the UK. It is meeting the strategic objective of the Company to build the UK’s first three commercially successful gasification plants
• Project Development: EQT had identified three biomass-to-energy opportunities in Greece and three RDF-to-energy projects in the UK, which almost reached financial closure.
• Green Economy Mark: London Stock Exchange has awarded EQT the “Green Economy Mark”, which recognizes listed companies generating 50% or more sales from environmental/green solutions.

Key Risks

• Widening of Net Loss: The Company had widened the net loss during FY20 as compared to FY19.
• Financial Risk: EQT is also exposed to financial risk associated with foreign exchange rates and interest rates movements. Also, there is a significant risk of changes in the fair value of its financial assets and liabilities with the economic downturn.
• Technological Advancement: The failure to integrate the latest technology may impact the brand reputation of the Company.
• Diminished Access to Debt Markets: Failure to obtain funding from financial markets may result in the delay of project completion and development programmes.

Now, we will analyse the Key Fundamental Statistics & Shareholding Pattern of EQTEC PLC.

Altair Group Investment Ltd is the most significant shareholder as it holds nearly 1,634.09 million shares as of 30 June 2021. 

Q2 FY21 Trading Update (as of 19 July 2021)

• The Company had appointed Nauman Babar as the successor of Finance Director Gerry Madden. Earlier on 28 May 2021, EQT announced regarding the retirement of Mr Gerry Madden.
• Moreover, the Company had reported significant development of the strategic projects with the partners.
• The Company had successfully raised £16 million to fund several projects and accelerate the EQT’s growth strategy.

FY20 Financial & Operational Highlights (for the twelve months ended 31 December 2020, as of 19 April 2021)

(Source: Company result)

• The total revenue stood at €2.2 million during FY20 as compared to €1.7 million for FY19.
• EQT had increased the net assets to €25.3 million as of 31 December 2020.
• With regards to the balance sheet, the Company had improved the cash balance from €0.5 million as of 31 December 2019 to €6.4 million at the end of FY20.

Share Price Performance Analysis

 (Source: Refinitiv; Analysis done by Kalkine Group)

On 16 September 2021, at 1:00 PM GMT, EQT’s shares were trading at around GBX 1.16, down by around 7.20% from the previous day closing price. Stock 52-week High and Low were GBX 3.168 and GBX 0.422, respectively.

From a technical standpoint, EQT is hovering between the lower Bollinger band and the middle Bollinger band, indicating an upside potential in the stock price. Moreover, the 14-days RSI of ~34.63 is approaching the oversold territory, supporting an upside momentum in the stock price.

Valuation Methodology: Price/Earnings Approach (NTM) (Illustrative) 

Business Outlook Scenario

The Company showed accelerated progress on the multiple deals in Greece, Croatia, and other central & southern markets during the first six months of 2021. Moreover, the Company had anticipated the closure of five to eight Biomass-to-Energy deals during FY21 with contracts value ranging from €20 million to €40 million. Furthermore, EQT had several RDF to Energy and Biomass-to-Bioenergy construction projects approaching financial closure. The pipeline of lucrative opportunities had prompted EQT to anticipate revenue of approximately €15 million and generate positive EBITDA in 2021.

Considering the robust sales & profitability guidance for FY21, an impressive pipeline of opportunities, decent liquidity profile, improved cash balance, bright industry prospects, and support from the valuation as done using the above method, we have given a “Speculative Buy” recommendation on EQTEC PLC at the current price of around GBX 1.16 (as on 16 September 2021 at 1:00 PM GMT), with lower-double digit upside potential based on 17.19x Price/NTM Earnings (approx.) on FY22E earnings per share (approx.). 

*The reference data in this report has been partly sourced from REFINITIV.

*All forecasted figures and Peer information have been taken from REFINITIV.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

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