Prymed For Success

Fearnleys published an initiation report on Pryme – a chemical recycling company. They are now building their first production facility. There are two years behind Quantafuel. Their market capitalisation is EURO 70 million, vs Quantafuel’s EURO 550 million market capitalisation. It is quite possible the should be reaching similar valuation at that time.

I have a small position. I believe the upside is significant, but the share price will start really moving as they will be closing to the start of the platn – which should be in about 12 month time. If you believe in chemical recycling of plastic as I do, this is a good opportunity. One does not need to buy right now, but rather gradually average in over several months.

Fearnley research below:

Prymed For Success
Initiation of coverage – Buy, TP NOK 110/sh.
We see PRYME as a chemical recycling pure-play that has laid foundations for an exciting facility rollout, with a plethora of trigger-points ahead. Buy.

We initiate coverage of Pryme BV (PRYME-NO) with a Buy Recommendation and a NOK 110/sh TP.

PRYME converts plastic waste into valuable products through chemical recycling. The company has developed an efficient and scalable technology process which yields, to our view, extremely attractive economics. Combining this with a strong list of partnerships in place and a first facility on the horizon, we see a great opportunity for any investor to gain exposure to the next player in an exciting new industry. Buy. TP NOK 110/sh.

The world has a plastic waste problem – we need new solutions, now
Plastic is virtually everywhere you look. However, with only 9% of all plastic produced since 1950 estimated to have been recycled, it is clear the world has failed in dealing with plastic waste in an effective manner. Furthermore, decisions from countries such as China banning the import of plastic waste have put further pressure on regions around the
world; these actions have prompted governing bodies and major brands to set lofty recycling targets. In order to have any chance of hitting these targets, chemical recycling, and its underlying companies such as PRYME, will be vital to the cause.

A chemical recycling pure-play with an exciting rollout on the horizon
PRYME has developed an efficient and scalable technology process with differentiating characteristics compared to its public peers. PRYME stands to receive revenues from sale of pyrolysis oil and receipt of plastic waste, whilst favorable capex and opex requirements results in attractive economics from their first facility in Rotterdam (>60kmt p.a. input – production expected 3q22E). Earnings are set to improve further with significant scale-up in production in phase 2 (>460kmt p.a. input) followed by an exciting pan-European rollout. With a formidable list of partners in place, the future looks bright.

Valuation – bags of upside, despite deep risking
We use a cash flow to equity valuation methodology with a 10% WACC and risk each phase to yield NOK100/sh. Our analysis is then supported by comparison to peers and % of 2030 market, pointing towards significant upside. Taking the blended average, we arrive at a TP of NOK110/sh. However, as the company advances through their phases we see significant de-risking occurring, resulting in big upside. With a plethora of trigger points ahead of us, we see PRYME as a great investment.


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