Original-Research: dynaCERT Inc - von GBC AG

Einstufung von GBC AG zu dynaCERT Inc

Unternehmen: dynaCERT Inc

ISIN: CA26780A1084

Anlass der Studie: Research Note

Empfehlung: Buy

Kursziel: 2.20 CAD

Kursziel auf Sicht von: 31.12.2021

Letzte Ratingänderung: -

Analyst: Matthias Greiffenberger, Julien Desrosiers

Half-year figures in line with expectations. Significant sales leaps should

be achieved in the second half of 2020. Target price confirmed: CAD 2.20,

rating: Buy.

In the first six months of the current financial year, sales revenues

increased significantly by 580.0% to CAD 0.33 million (previous year: CAD

0.05 million). This was due to the good sales start into the 2020 financial

year, although sales and in particular production were significantly

restricted due to the corona crisis. A total of 47 units were delivered in

the first half of 2020. While sales revenues of CAD 0.31 million were

generated in the first quarter of 2020, there were no significant sales

contributions in the second quarter. We had already anticipated this

development, as the production facility had to remain closed. Currently,

production has restarted and we expect significant sales increases in the

second half of the year. dynaCERT has maintained the existing employee

structure even during the COVID crisis and has received governmental

support in the amount of CAD 0.44 million.

As already described in the research report of August 10, 2020, it was

announced on May 11, 2020 that KarbonKleen Inc. has been granted exclusive

dealer rights for the truck sector in the USA. KarbonKleen receives

regional exclusivity and in return has to purchase at least 150,000

HydaGENTM units over the next three years. The first order for 3,000 units

was placed on May 9, 2020.

The company also has a wholly owned subsidiary called dynaCERT

International Strategic Holdings Inc. ('DISH') to realize international

investments in relevant technologies and sales commitments and to implement

the subscription model for the dynaCERT units. Thus, 3,000 units were

committed to KarbonKleen until December 31, 2021 under a subscription

model. Furthermore, dynaCERT indirectly holds 20% of KarbonKleen via DISH.

In our opinion, this is an important investment, as KarbonKleen has secured

exclusive rights for the truck market in the USA. This is likely to be the

most important market for dynaCERT, especially in the near future.

Therefore, a 20% share in the most important target market should be very

important and could turn out to be a very profitable investment.

In addition, dynaCERT has moved up from the TSX Venture Exchange to the TSX

Exchange. We believe this should provide the Company with better access to

capital and increased visibility.

Moreover, within the framework of homologation (homologation is a

supranational system for the approval of motor vehicles and vehicle parts)

of the ABE acertificate of conformity in the United Arab Emirates could be

achieved. Thus, this market should be well accessible now.

Overall, the first half of the year was in line with expectations, and with

the resumption of production it should also be possible to achieve

significant sales increases in the second half of 2020.

Production was stopped in the first half of the year and should have

resumed in the meantime (August 2020). The company has also started

offering leasing solutions. As a result, sales revenues will be lower in

the short term, but the margin will be significantly higher, as recurring

sales can be booked almost entirely as revenue once the break-even point

has been reached.

With dynaCERT technology, there should be considerable savings of diesel,

which should lead to strong cost reductions. Companies with a large number

of diesel engines, such as logistics companies and mining companies, will

particularly benefit from this. The fact is that such companies rely

heavily on new technologies for ongoing cost reduction. For example, there

is an adoption explosion as soon as a new technology is used. The

background to this development is likely to be that market participants who

use the new technology work much more efficiently and either drive other

market participants out of the market or indirectly force them into

adopting the new technology. This is particularly evident in the

development of trailer aprons, where market penetration began in 2008.

After two years, the adoption rate was already over 60%.

We assume that, on the one hand, the effectiveness of the dynaCERT

technology is significantly higher than that of trailer aprons but, on the

other hand, the costs are also significantly higher than for trailer

aprons. According to the Canadian Council of Energy Ministers, trailer

aprons cost between 1500 and 2500 CAD and achieve fuel savings of between 4

and 7%. The dynaCERT technology has shown varying degrees of fuel savings,

often between 9% and 15%. This technology, with a sales price of CAD 6000,

would be roughly equivalent to the price/performance ratio of trailer

skirts.

On the basis of this model, we have prepared our medium-term sales

forecast. We expect sales to increase significantly to CAD 32 million in

2020, followed by CAD 200 million in 2021 and CAD 350 million in 2022. In

view of our assumption regarding comparable developments in trailer skirts,

our model can still be considered conservative. At the same time, the

management is also relying on leasing models in addition to selling the

systems. Leasing should enable the company to penetrate the market much

faster, as this is much less capital intensive for customers. However, in

the short term, this leads to lower sales at dynaCERT, as the annual

leasing rate is lower than the one-time sales price. In the long term, the

proportion of recurring sales will increase, which should also make a high

contribution to earnings.

Anticipated order fulfillment is approximately 2,500 units and a further

3,000 units in the subscription model. We assume that one unit will be sold

at a price of CAD 6,000 and that the leasing will pay for itself in about

two years. A capacity limit should not be a limiting factor for the coming

years. Currently, the company can produce about 2,000 units per month, or

24,000 units per year, which corresponds to a turnover of about 144 million

CAD. This would correspond to one production shift. With three shifts, the

capacity could be tripled, i.e. increased to 432 million CAD turnover. We

assume that the production line can also be expanded in the medium term, so

that no capacity limits are reached.

The high sales growth should be supported by external sales. The high sales

growth should be supported by external sales through the company's

extensive global dealer network that now exceeds 40 dealers. dynaCERT has

dealers in Canada, the USA, Mexico, South America, Europe and the Middle

East and India. dynaCERT also recently announced a cooperation with

Alltrucks in Europe which is anticipated to facilitate installation and

distribution channels.

dynaCERT has announced that it is now active in the FreightTech market.

FreightTech should be an excellent fit for dynaCERT's portfolio as it

addresses very similar customers. This should allow the company to create

even more attractive offerings for customers, which could further

accelerate the pace of growth in the future.

Our current sales forecast does not yet take into account the enormous

potential of CO2 certificates 'Carbon Credits'. This business area could be

even more profitable in the future than the classic sale of dynaCERT

equipment. By reducing the fuel consumption of diesel engines while at the

same time reducing carbon emissions and other pollutants, the dynaCERT

technology can become very lucrative with the world-wide market acceptance

of the CO2 certificates. For example, it is estimated that a class 8 truck

can generate up to EUR2,500 per year (3,918 CAD/year) in emission credits at

a market price of EUR25/t CO2. We see this step as the next stage of

development for the company and this would again lead to a significant

increase in sales revenues.

On the earnings side, we expect dynamic development since, on the one hand,

the gross margin is very high at 50% and, on the other hand, the leasing

model should generate high recurring revenues at very low variable costs.

We assume that costs will remain largely stable and develop

disproportionately low. In addition, the gross margin should continue to

rise in the medium term, as the unit costs for an increasing number of

units should continue to fall. In the R&D area, we continue to expect cost

increases, as technology is expected to continue to develop continuously.

Furthermore, we assume that business development costs will also continue

to rise.

In view of the as-yet-unanticipated income from emission credits, we have

prepared an income forecast based on the units sold. Currently, we expect

after-tax earnings of CAD -1.34 million in the current fiscal year 2020 and

CAD 21.76 million in 2021, followed by CAD 40.10 million in 2022.

Die vollständige Analyse können Sie hier downloaden:

http://www.more-ir.de/d/21701.pdf

Kontakt für Rückfragen

Jörg Grunwald

Vorstand

GBC AG

Halderstraße 27

86150 Augsburg

0821 / 241133 0

research@gbc-ag.de

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Date and time of study completion: English: 05.10.2020 (08:45)

Date and time of first transmission: English: 05.10.2020 (10:00)

Target price valid until: 31.12.2021

-übermittelt durch die EQS Group AG.-

Für den Inhalt der Mitteilung bzw. Research ist alleine der Herausgeber bzw.

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