GreenPower Motor Company Inc

GreenPower Motor Company Inc (TSXV: GPV) is the manufacturer and distributor of an all-electric charter, school and city buses. The company offers electric-powered transit bus deploying electric drive and battery technologies with a lightweight chassis and low floor body. Its product line includes All-electric transit buses and All-electric school and shuttle buses.

Key highlights 

• Delivered five EV Star Cab and Chassis to Forest River: Forest River, a Berkshire Hathaway Company has taken possession of the first five of GreenPower's purpose-built EV Star Cab and Chassis, according to the company (CC). Moreover, Forest River also brings tremendous volume potential, according to management, and will be supplying an all-electric StarCraft product that is exactly what the market requires. We feel that many more deliveries to Forest River would help the organization in the future.
• Higher number of vehicles delivered: In the third quarter of 2021, the firm constructed and delivered 17 buses, including 14 EV Stars to Green Commuter, one EV Star Cargo Plus to the City of Vancouver, and one EV Star and one EV Star plus to ABC Bus Inc. (“ABC”), Greenpower's New York distributor.

Source: Company

• Increased production: In response to excellent feedback from demonstrations and expected future demand, the business accelerated manufacturing of B.E.A.S.T. all-electric school buses from five to ten units per month. Furthermore, it estimates that enhanced EV Star manufacturing would begin to deliver by the end of the fourth quarter, representing potential revenue of over USD8 million. The expanded manufacture of ten B.E.A.S.T. school buses per month, which will begin delivering in mid-2021, might result in quarterly sales of over USD10 million.
• Ample liquidity: On December 31, 2020, the Company had a cash balance of USD 20.9 million and working capital of USD31.3 million. Along with this the Company also holds an available line of credit in excess of USD 5.0 million.

Financial overview of Q3 2021

Source: Company

• The company report lower revenue at USD 2.3 million in Q3 2021, against USD 4.9 million in the previous corresponding period.
• The gross profit stood at USD 0.9 million V/s USD 1.4 million in pcp.
• The company posted higher operating expenses to USD 2.6 million, against 1.9 million in the previous corresponding period, primarily on the back of higher administrative fees of USD 1 million V/s USD 0.8 million, higher insurance expense as well as higher share-based payments of USD 0.5 million V/s USD 0.03 million.
• Loss from operation for the reported period increased and stood at USD 2.1 million, against USD 1.0 million in the previous corresponding period.
• Net loss in Q3 2021 also increased to USD 2.4 million, against USD 1.0 million in pcp, primarily due to above stated reasons coupled with higher income tax expense.

Risks associated with investments

The company may witness setbacks from interest rates and foreign exchange. Furthermore, the company imports several raw materials from China and an increase in tariffs may hinder the company’s cost structure and as well as the overall profitability. 

Stock recommendation

The firm is undergoing a transformation as it uses its purpose-built EV platform to develop and market new products like as the EV Star Cargo. Furthermore, it is cultivating connections with major high-volume OEMs who understand the enormous potential of its EV Star cab and chassis to serve as the platform for the group to upfit a finished all-electric vehicle tailored to their needs. These OEMs are facing a flood of demand for electric vehicle solutions, and its cab and chassis give the flexibility and functionality needed to address this need in the short and long term, is a key positive aspect. However, on the valuation front, the stock of GPV trades at an EV to Sales multiple of 5.27x on NTM basis, higher than the industry (Automobiles and Auto Parts) median of 1.01x. Hence, considering the stretched valuation, we recommend a ‘Watch’ stance on the stock at the closing price of CAD 20.86 on June 4, 2021.

One-Year Technical Price Chart (as on June 04, 2021). Analysis by Kalkine Group

*The reference data in this report has been partly sourced from REFINITIV.

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