EQTEC PLC

EQTEC PLC (LON: EQT) is a gasification technology and engineering entity that transforms waste-to-energy. The AIM listed Company has the Green Economy Mark, implying that over 50% of its revenue comes from environmental/green solutions.

Investment Rationale – SPECULATIVE BUY at GBX 1.185

• On 14 September 2021, EQT completed the acquisition of a 1.2 MWe waste-to-energy gasification plant in Croatia.
• For FY21, EQT expects to generate nearly €15 million in revenue, and projects to achieve its first year of profitability.
• EQT is rapidly expanding pipeline and prioritizing project developments to deliver significant value for its shareholders.
• On trailing 12-month basis, EV/Sales and Price/Book valuation multiples were undervalued against the Renewable Energy’s industry median. Adjacently, the Company has higher dividend yield than the industry median.
• From a technical standpoint, the momentum oscillator RSI (~46.059) is in the oversold zone, supporting the upside potential.

Key Risks

• As the global demand outlook for energy is unstable due to the Covid-19 mayhem, while there are significant operational challenges. The short-term outlook for the Company looks skeptical. Moreover, the loss of contracts can impact the growth trajectory.
• The overall business of the Company could also be affected by a change in regulations and government policies.
• As the Company remained in losses, growth prospects and operations are dependent upon external funding.

Recent News

Investment: On 16 September 2021, EQT signed for additional investment in Billingham RDF-to-energy project with a strategic investor, Kibo Energy PLC. EQTEC will retain 45.46% equity in the Project.

Trading Update (for the second quarter ended 30 June 2021, as on 19 July 2021)

• During Q2 FY21, EQT witnessed an increase in pipeline opportunities and growing projects developments.
• It raised £16 million through equity placing in May 2021 to accelerate the Company's growth strategy.
• The Italia MDC Project is financially closed now. It is expected that EQT will earn technology sales of €1,750,000 as well as the recurring revenue and profits from the plant.

One Year Share Price Chart

 (Data Source: REFINITIV, Analysis done by Kalkine Group)

Valuation Methodology: EV/Sales Approach (FY21) (Illustrative) 

Conclusion

During H1 FY21, EQT experienced an increase in pipeline opportunities and announced the financial close of the Market Development Centre in Italy. Subsequently, revenue and EBITDA targets for FY21 remained on track. The recent capital raise shall also support the strategic growth, while the search for Financial Director was also completed and transition was expected underway. However, the uncertainties regarding the delay of projects due to operational challenges imposed by the Covid-19 pandemic. Notwithstanding, the Company is pursuing additional growth opportunities and expects to report its first year of profitability in FY21. The stock made a 52-week High and Low of GBX 3.17 and GBX 0.42, respectively.

Based on the excellent project developments, enhance pipeline, recent capital raise, revenue, and EBITDA guidance, with support from the valuation conducted above, we have given a “SPECULATIVE BUY” recommendation on EQTEC PLC at the current price of GBX 1.185 (as on 27 September 2021, at 8:35 AM GMT+1), with lower double-digit upside potential based on 8.078x EV/NTM Sales (approx.) on FY21E Sales (approx.).

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached or if the price closes below the support level (indicative stop-loss price).

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

*All forecasted figures and Peers/ Industry information have been taken from Refinitiv.

*Dividend Yield may vary as per the stock price movement.

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