HPQ Silicon Resources Inc. (TSXV: HPQ) is a mineral exploration company, which specializes in the exploration of quartz in mining sites located in Quebec as well as development for its transformation into silicon. 

Key Highlights:

• Focus on Creating safer ingredients for EV batteries: The group is focusing on manufacturing the PUREVAPTM “Nano Silicon Reactors”, a new process which would transform Quartz Reduction Reactor (QRR) into the nanomaterials. This product is raw material used for the developing EV batteries. This is a new plasma-base process that will allow a direct Quartz to Fumed silica transformation, removing the usage of hazardous chemical and eliminating the Hydrogen Chloride Gaz (HCI) associated with its manufacturing.
  

• Higher Operating loss: In Q3FY21, the company reported a higher operating loss of CAD 0.30 million, which is higher than CAD 0.26 million in pcp. This is primarily due to an inclusion of amortization of intangible assets amounting CAD 0.03 million along with higher other operating expense of CAD 0.11 million v/s CAD 0.09 million in pcp.

• Depressing Cash flows: In 9MFY21, the company reported its Cash flows used for operating activities of CAD 1.31 million, which is higher than CAD 0.96 million in pcp. This might dampen the overall liquidity of the firm and remains a major concern for the company.

Stock Recommendation:

The company is yet to report revenue from its operations and is conducting research activities to become a producer of silicon (Si) materials suitable for the next generation Lithium -ion batteries. Hence, we are not certain regarding the exact time of revenue generation. Moreover, on a price to book value basis, the HPQ stock is available at 7.7x on TTM basis, higher than the industry (Basic Materials) median of 2.1x. Considering the aforesaid facts, we give an ‘Avoid’ rating on the stock of HPQ at the last closing price of CAD 0.465 on April 20, 2022.

One-Year Technical Price Chart (as on April 20, 2022). Source: REFINITIV, Analysis by Kalkine Group

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