Drone Volt (EPA: ALDRV) Research Update

Arrowhead is updating its coverage on Drone Volt SA (“Drone Volt”, “DRV” or “the company”) with a fair value of EUR 0.03 per share (share price on December 19, 2023: EUR 0.01) in the low-bracket scenario and EUR 0.05 per share in the high-bracket scenario using the DCF methodology.

• In November 2023, Drone Volt introduced its latest drone, Drone Volt Kobra (Volt Kobra), at the Milipol exhibition, held at Paris Nord Villepinte Exhibition Center. The drone is equipped with new software, hardware and artificial intelligence solutions, and it has been designed for security, surveillance and inspection applications. The drone will facilitate inspection missions of police, armies and administrations.
• In August 2023, the company signed a multi-year contract with a major player in the European energy distribution sector. The contract had a minimum duration of 4 years and would generate an annual turnover of EUR 200K. The contract would be related to network inspection missions to determine possible maintenance operations, thus strengthening security and productivity. The new contract highlighted group diversification strategy and would unravel “Drone as a Service” by launching Drone Volt Expert, offering billing based on usage.
• In July 2023, the company announced that it had acquired the assets of “Aeraccess Services”, previously known as Air Marine, for a consideration of less than EUR 100K. It received authorization from the bankruptcy judge of the Evry Commercial Court to recover tangible and intangible assets that belonged to Aeraccess Services. With the acquisition, DRV would get access to customers and a large asset pool necessary to fulfill the contracts already signed or yet to be signed. The acquisition would further enhance the growth of the company’s “Drone as a Service” segment, providing a good offering mix and thereby increasing the company’s gross profit margin.
• During Q3 2023, the company’s revenue stood at EUR 3.1 mn compared with EUR 3.9 mn in Q3 2022. The decline was caused mainly by persistent supply tensions, which weighed on its distribution activities. The distribution segment generated revenue of EUR 2.5 mn compared with EUR 3.9 mn in Q3 2022, with a gross margin of 15% during the third quarter.
• Additionally, the company continued to deliver on orders it received in February 2023 with cumulative billings of EUR 13 mn until the end of Q3 2023 and a total of EUR 14 mn as of now. DRV is expected to honor the entire order of EUR 20 mn, doubling the company’s revenue by the end of FY 2023. The gross profit margin of the company stood at 23% in Q3 2023 as compared with 14% in Q2 2022.
• In Q3 2023, the company launched its “Drone as a Service”, offering billing based on use rather than ownership of its products. DRV also continued the sale of its products from Drone Volt Factory, including the sale of 5 HERCULES 20, 2 HERCULES 10 and 2 LINEDRONE to its partner HYDRO-QUEBEC. DRV’s revenue from the Drone Volt factory increased five-fold to EUR 0.5 mn., with a gross margin of 61%, compared with 17% in Q3 2022.