BQE: Excellent Q4 Financials; Increasing Target Price
What you need to know:• BQE reported Q4 & 2023 financial results yesterday that came in largely ahead of our expectations on revenue.
• Proportional revenue was $5.4M compared to our estimate of $4.2M and adjusted EBITDA was $0.5M compared to our estimate of $0.6M.
• BQE remains well positioned for another record year in 2024, we are expecting 8% revenue growth and 36% EBITDA growth.
• We are increasing our target to $71/share based on 11.0x 2025E EBITDA.
BQE Water (BQE:TSXV, BTQNF:OTC) reported Q4 and 2023 financial results yesterday after market close. Q4 marked another excellent quarter for BQE, beating our estimates on revenue and being in line on EBITDA. The beat was driven by the operation services (recurring) segment which grew 114% YoY. We remain highly confident in our investment thesis in BQE which was laid out in our initiation report last month (read here). We are maintaining our BUY rating and increasing our target price to $71.00/share (previously $55.00/share) on BQE Water.
Key Highlights
For Q4/23:
• Proportional revenue came in at $5.4M (+21% YoY) compared to our estimated $4.2M. This was comprised of operation services revenue of $2.8M (+114% YoY, 52% of revenue), technical services revenue of $2.2M (+1% YoY), and BQE’s share of JV revenue of $0.4M (-59% YoY). Q4 is seasonally weaker for BQE so these results are highly impressive.
• Gross margin of 55% vs. our expectation of 45% and 41% in Q4/22 (note that this is reported as operating margin before depreciation).
• Adjusted EBITDA of $541K (10% margin) vs. our estimate of $600K and ($0.1M) in Q4/22.
• Net income of $249K or $0.20/share vs. our estimate of $400K or $0.29/share and ($244K) or ($0.19/share) in Q4/22.
For 2023:
• Proportional revenue was $22.7M (+20% YoY) vs. $21.5M expected. This was comprised of $8.3M operation services (+100% YoY, 36% of revenue), $9.9M technical services (+23% YoY), and $4.6M share of JV revenue.
• Gross margin was 50% vs. our estimate of 48% and 42% in 2022.
• Adjusted EBITDA came in at $4.7M (20% margin) vs. our estimate of $4.7M and $3.1M (16% margin) in 2022.
• Net income of $2.7M or $2.12/share vs. our estimate of $2.8M or $2.22/share and $1.2M or $0.93/share in 2022.
BQE Water is engaged in the acquisition and development of processes to treat metal-laden, sulphate-rich waste water streams for acid neutralization and metal recovery. The principal operations of Co. are to build process plants and earn revenues from recovered metals, treatment fees, plant sales and process licenses.
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