The company, which is one of the few UK-listed clean energy companies, is expected to see rising demand for its technology as concerns over the long-term supply of energy and meeting net-zero commitments intensify.
As an investment theme, clean energy has rebounded lately. Over the past month, the theme is up 16.68%, according to the Opto investment screener. Underlying ETFs such as APLS Clean Energy [ACES US] and Investec Solar [TAN US] have gained 20.5% and 22.5%, respectively.
EQTEC drops on share placing plans
Despite rebounding sharply on 29 July, EQTEC’s share price underperformed in July. Between 11 July and 28 July, the stock dropped a hefty 40%. It also hit a 52-week low of 0.3900p in intraday trading on 19 July.
EQTEC’s poor share price performance coincided with news that the company would use a share placing to raise £3m. The placing was priced at 50p, representing a discount on the then share price. The company said it would use the funds to ‘maintain momentum’ in its projects and help it ‘build for scale’ to support its growing pipeline.
Generally, 2022 has been miserable for EQTEC’s investors. Since the start of the year, EQTEC’s share price is down 61.57% (through 29 July). A rally in mid-March quickly dissipated and the stock has been on a downward spiral ever since.
What does EQTEC do?
EQTEC turns waste into fuel through a process called gasification. Biomass, agricultural waste, such as feedstock, and industrial waste are all used to create a product called syngas through a thermochemical process.
Syngas can then be used to generate electricity and heat, or act as a commodity. Potentially this addresses two problems facing Europe right now: concerns over the supply of energy and commitments to meeting net-zero carbon emission promises.
Other advantages of the technology include a reduction in waste going to landfill and reducing the harmful gases associated with burning waste.
Why should investors care about EQTEC’s share price?
EQTEC bills itself as ‘one of the most investable’ companies in the net zero economy. Its investor website cites a 2021 report from the International Energy Agency that says modern bioenergy is forecast to grow by 90% over the next decade. And while the company is yet to become profitable, demand for its technology is booming.
In 2021, EQTEC’s revenue climbed fourfold year-on-year as macroeconomic events boosted demand. Last year, revenue came in at €9.2m, up 410% from €2.2m in 2020. The company also managed to reduce its underlying earnings (EBIDTA) loss to €4.7m from €5.8m.
“Post-Covid challenges to COP26 to more recent geopolitical events, we have experienced more demand than ever and are taking our place as a leading technology innovator for fossil fuel replacements,” chief executive David Palumbo said.
The company is active in seven markets and is expanding its operations. In July, the EQTEC acquired a dormant waste to fuel gasification plant in Villers-sous-Montrond, France. Once operational, the plant will turn 45,000 tonnes of waste into clean electricity that can be used by the national grid. EQTEC hopes to generate £10m in annual revenue from the plant.
The company’s expansion could put more pressure on costs — and its share price — but longer-term could put EQTEC in a position to benefit from the shift to cleaner sources of energy.
The median 12-month analyst price target according to the Financial Times is 3.36p, which represents a 622.53% increase on 29 July close.