QFUEL reported yesterday Q2. I found the presentation very good and recommend for watching see my yesterday post for the link. Pareto came up with bullish note on the report today. See the summary below
|Exciting progression with Dubai and Saipem MoU|
|Quantafuel delivered a quarterly report containing some short-term disappointments, where the volume guiding for 2022 was suspended, but also promising outlook comments regarding pipeline projects and the technology licensing MoU with Saipem. Revenue and EBITDA missed expectations and came in at NOK 5m/-72m. However, as the investor focus shifts from Skive to the other projects, especially the Dubai project and the new MoU with Saipem, we believe the business case will be less dependent on operational updates from Skive. We still foresee revenues of NOK 1.2bn/2.1b for 2025E/2026E with an EBITDA margin of 36%/46%. Buy TP NOK 17 reiterated. |
Volume guiding suspended after a challenging quarter
Due to high gas prices, Skive was running on negative gross margins in Q2’22, causing the production to lower volume intake of waste plastics to minimise losses. Hence, the revenues for the quarter came in at NOK 5m, lower than the NOK 13m for Q1’22.Instead of optimizing volume output, QFUEL prioritised testing hard-to-convert plastics to get the most data and information out of each dollar spent on opex. QFUEL is still confident that Skive will be CF positive by YE.
Revenues estimate at Skive lowered, while the rest is intact
For the remainder of the year, we expect Skive to be used for feedstock tests and data gathering, rather than proving ability to increase capacity utilisation. Hence, we push our capacity ramp-up estimates at Skive out in time, lowering revenues for 2022-2023E. Looking forward, the progress on the project pipeline provides comfort to our long-term estimates. The technologylicensing MoU with Saipem is especially exciting, as we believe the MoU will provide a foot in the door for QFUEL’s technology as Saipem can provide the performance guarantees required by oil majors for setting up plants in relation to existing oil refinery sites.However, we would like more details and firm agreements before including licensing and royalty revenues in our estimates.
Promising outlook, with the Saipem MoU providing solid upside
it has become clear that Skive will never become a fully functional commercial plant. As investor focus shifts operational updates from Skive, we expect the Dubai project and MoU with Saipem to drive the business case. The revenue potential from the MoU is not reflected in our valuation yet, but if the MoU develops into firm contracts, we see solid upside to current estimates. Our valuation is based on a DCF reaching steady state by 2026. Even though we expect the company to have a large capital need, we still see upside to the current price. Buy TP NOK 17.
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