What you need to know: • BQE’s recurring revenue is growing as a percentage of total revenue, making its business more predictable and stable. • The Company has major tailwinds from increasing environmental regulations on water discharge as well as increasing mining capex. • BQE’s EBITDA margins have been steadily improving over the past five years due to its asset-light model, reaching 22% in 2023E. • BQE trades at 5.5x 2025E EBITDA, a significant discount to its peers. BQE Water (BQE:TSXV, BTQNF:OTC) is a leading provider of water treatment services for mining and metallurgical processing clients globally. BQE uses innovative solutions and a holistic approach to water management throughout the project life cycle to drive regulatory compliance and social responsibility. Over the past five years, BQE has grown proportional revenue (including its share of JV revenue) at a 17% CAGR and adjusted EBITDA at a 32% CAGR; We believe it can sustain these growth rates while recurring revenue becomes a larger portion of its business and ESG tailwinds support demand. We are initiating coverage on BQE Water with a BUY rating and target price of $55.00/share. Investment Thesis Summary Growing Stream of Recurring Revenue. Recurring revenue represents over 30% of BQE’s proportional revenue through the production of clean water and tolling fees from various long-term contracts. This figure has increased from 13% in 2020 as BQE’s clients advance their projects into production; we expect recurring revenue to represent 44% of proportional revenue by 2025. Tailwinds in Environmental Regulations & Mining Capex. Environmental regulations for water discharge have been getting increasingly strict over the years. Additionally, we believe we are in the early innings of a mining capex cycle where hundreds of new mines will be opened, playing into BQE’s value proposition. Highly Profitable & Improving. BQE has been steadily increasing its EBITDA margins from negative levels a decade ago to 22% in 2023E. BQE’s business model is asset-light as its clients pay for the capex required for the water management plants. As such, we expect profitability to continue scaling upward with size. Unique IP Protects & Drives Growth. BQE has unique IP in areas of crucial importance for miners to meet regulations and/or reduce costs and risks. Regulations drive the demand for BQE’s IP in selenium, sulphate, ammonia, thiosalts, cyanide, and trace heavy metals removal. Clean Balance Sheet & Capital Structure. BQE has an excellent balance sheet, with $6.7M in cash (and growing) and no interest-bearing debt. Its capital structure is incredibly tight with only 1.3M shares, having not raised equity since 2018. 46% of BQE’s stock is held by three private investors and 8% by management/board. Value Stock in a High Multiple Industry. BQE trades at 6.4x/5.5x 2024E/2025E EBITDA compared to engineering service firms at 14.1x/12.8x and water treatment firms at 11.5x/10.3x. Furthermore, there have been several acquisitions in the water treatment space over the last few years, which average 15x trailing EBITDA. We value BQE using 9.0x 2025E EBITDA, translating to our $55.00/share target.