Post the Q1 report ABG Sundal Collier published a research update. We summarized the Q1 report in the previous post on this blog.
See the summary of the ABG research below:
|Some progress, some setbacks, in Q1|
|Q1 demonstrated the complexity in the case Strong fundamentals remain in place If it delivers, the value is there|
|Skive shutdown and lower ’22 production guidance|
Q1 for Quantafuel was characterized by progress, but also operational disappointments. It secured NOK 400m for its share of capex for the Esbjerg sorting plant, reached 30 days of continuous production at Skive, and declared Proof-of-Concept. However, it also experienced equipment malfunction leading to downtime and repairs, and the ‘22 guidance was lowered to 6,000-8,000 tonnes from 12,000 also as the company deems it of more value to prioritize process design learnings for future plants over short-term volume. The EBITDA of NOK -52m suggested a higher cost level than we modelled based on the ~NOK 30m per quarter in corporate SG&A, while the cash position ended at NOK 577.5m.
Operational progress is what the stock needs
The push to increase the recycle rates of plastics appears to remain strong, and market price proxies like biofuels are at ~USD 2,000 per tonne vs the base assumption for QFUEL’s liquids at ~USD 1,000 per tonne. With respect to the share price performance, we think it’s all about improving operational performance. There are important triggers ahead if the company delivers, including concluding the Esbjerg project financing, ramping up Skive lines 3 & 4, and progressing with preparations for final investment decisions within its defined roll-out programme.
Cost of capital rising, but plant economics remain solid
In this update we have included the changes to the roll-out schedule guided for in the Q4 report, included the Q1 results/’22 guidance and incorporated the Esbjerg sorting plant with start-up in H2’23. The profile includes all modelled plant capex paid by ’24 but the majority of earnings come in late ’24 and in ’25. At 10% WACC, we estimate a SOTP of the guided roll-out programme of ~NOK34/sh, and estimate the share today prices in 1 PtL plant in addition to Skive, Kristiansund and Esbjerg Sorting, which are all projects under development. We maintain BUY with TP NOK 30 (42).
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