Now that it has solved its financing issues, Leclanché has started delivering on its pipeline of projects to supply battery energy storage solutions for utility-scale, microgrid and e-transport applications. Revenues more than doubled during H118. However, some significant contracts that were pending at end June have been delayed while third parties await project funding, so we revise our FY18 estimates downwards and cut our indicative valuation from CHF2.51/share to CHF2.33/share.
Group H118 revenues (including other income) more than doubled to CHF22.3m as access to finance enabled the company to start delivering against the pipeline of contracts already received for delivery during FY18. These total over 50MWh of capacity, primarily for utility-scale projects. Stripping out exceptional costs, normalised EBITDA losses widened by CHF7.5m to CHF17.1m. Management continued with its financing programme, which resulted in convertible loans (excluding CHF20.0m that has yet to be provided) reaching CHF46.6m, all of which are now owned by majority holder FEFAM. While this is potentially highly dilutive (see below), management notes that it now has sufficient funding to fully finance the company through to FY20, when it expects to be EBITDA positive.
Our previous estimates assumed that additional utility-scale orders would be confirmed for delivery in H218. These have been delayed, leading management to note at the interim stage that the company was on track to double revenues during FY18, ie to at least CHF36m. We therefore cut our FY18 revenue estimate by 32% to CHF42.5m. We leave our FY19 and FY20 revenue estimates broadly unchanged as these are partly underpinned by framework contracts for e-transport solutions with Skoda Electric and Sun Mobility. In both cases, Leclanché’s modules need to be certified before volume deployment. While there remains a risk that individual utility scale projects may be delayed going forward, the number of projects in the pipeline reduces the risk to our estimates.
Our valuation is based on a DCF calculation, taking the growth rate adopted in our estimates and applying a terminal growth rate of 3% and WACC of 10.0%, as set out in our June note, since both the technology and Leclanché’s ability to execute on large projects are proven. This gives an indicative valuation of CHF2.33/share (previously CHF2.51/share).
