PyroGenesis Canada Inc (TSX: PYR) is a company that designs, develops, manufactures, and sells sophisticated plasma processes and systems. Defense, metallurgical, mining, additive manufacturing, oil & gas, and environmental industries benefit from the company's technical and production experience, cutting-edge contract research, and turnkey process equipment packages.

Key Highlights

• Degraded financial numbers: The company displayed week financial statistics in FY 2021. However, it increased its topline by robust 75% to CAD 31.0 million but failed to carry this winning momentum in the bottom line, where it reported a net loss of CAD 38.4 million against a profit of CAD 41.7 million in pcp. Furthermore, it incurred greater cost of sales and other operating expenses, resulting in an operating loss of CAD 17.3 million, compared to a loss of CAD 1.3 million in the prior period.

• Loss on Strategic Investments: The adjustment to the fair market value of strategic investments in 2021 resulted in a loss of CAD 21.4 million compared to a gain in the amount of CAD 44.6 million in 2020, representing a decrease of CAD 66.0 million. The decrease is primarily attributable to the decreased market share value of common shares and warrants owned by the Company of HPQ Silicon Resources Inc.
  

• Lower margin profile v/s Industry: In FY 2021, the company witnessed lower performance under operating margin matrix, consisting of EBITDA margin, operating margin and net margin which exhibits the extreme cost pressure on the company.

Source: REFINITIV, Analysis by Kalkine Group 

Stock recommendation

The company gained some traction and saw an increase in its top line, but its cost of sales skyrocketed in the reporting period, along with higher R&D expenses and other operating expenses, resulted in a net loss of CAD 38.4 million against a profit of CAD 41.7 million in pcp. Furthermore, its operating margin profile is at the lower end of the industry, indicating that it is under extreme pressure. Moreover, it also has a prolonged Cash Cycle (Days) which may create a difficulty for the company to have enough cash on hand to meet their financial obligations.

On the positive side the Company plans to take advantage of its unique position in its main business offerings to accelerate growth, with a particular emphasis on offerings geared to aggressively reducing GHG emissions and the world’s carbon footprint. Hence, based on the above rationales we recommend a “Watch” rating on the stock at the closing price of CAD 2.48 on April 21, 2022.

One-Year Technical Price Chart (as on April 21, 2021). Source: REFINITIV, Analysis by Kalkine Group

Technical Analysis Summary

Investors can evaluate the stock based on the support and resistance levels provided in the report in case of keen interest taking into consideration the risk-reward scenario.

Disclaimer

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