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Arrowhead published an Equity Research Report on 5N Plus
June 8, 2023


5N Plus (TSX:VNP) Research Update


  • Arrowhead is updating its coverage on 5N Plus with a fair value bracket of CAD 4.0 to CAD 4.4 bracket (share price on June 08, 2023: CAD 3.15) based on the discounted cash flow (DCF) method.
  • 5N reported a revenue of USD 55.3 mn in Q1 2023, a decline of c. 14% compared to Q1 2022, owing to the company’s strategic decision to focus on high-margin and value-adding segments. The company took an exit from the extractive and catalytic market in Q4 2022, which led to a drop in the revenue base in FY 2022 as well as Q1 2023.
  • The Speciality Semiconductors segment’s revenue increased to USD 32.7 mn, up c. 20% YoY driven by strong demand from the terrestrial renewable energy and solar space power markets. This growth was more than offset by the decline in the Performance Materials segment’s revenue to USD 22.5 mn, down 39.3% YoY, due to the exit from the extractive and catalytic sector.
  • VNP generated an adjusted EBITDA of USD 8.8 mn in Q1 2023, a growth of c. 56% YoY. The EBITDA margin increased from 8.7% in Q1 2022 to 15.9% in Q1 2023. The adjusted gross margin was 29.8% in Q1 2023 as compared to 21.9% in Q1 2022, driven by improvement in product mix (due to exit from low-margin extractive and catalytic sectors), and the successful implementation of the ‘Commercial Excellence’ program. The cash and cash equivalents stood at USD 41.4 mn in Q1 2023, compared to USD 42.7 mn in FY 2022, while the cash outflow from operations was at USD 3.8 mn in Q1 2023.
  • The company is planning to increase the production capacity of AZUR Space (wholly owned subsidiary) by 30% over the course of 2023 and 2024 through productivity improvements, installation of new equipment, and commissioning of co‐investment equipment to meet the growing demand of existing customers.
  • AZUR Space (wholly owned subsidiary) with high-end solar cell technology played a crucial role in the European Space Agency’s ‘Mission to Jupiter’. NASA is also planning to employ AZUR’s 3G28 solar cells for its mission to Jupiter in the future, it solidifies the company’s vital role as a key supplier in the world’s leading space agencies.
  • The company’s management is committed to its strategy of focusing on products that offer high growth potential and superior margins while meeting the customer’s demand in value-added markets. The company anticipates a strong demand in its target market i.e. in the healthcare and the pharmaceuticals market.
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