HEV Update: Progress Continues Toward Real Orders and Meaningful Revenues

11/12/2009

MDB issued a research update today on Enerl, Inc. (HEV) reiterating its BUY recommendation and $8.00 Price Target.

Ener1 Inc. posted third quarter financial results for 2009 with revenues of $8.1 million including $7.7 million in revenues from Enertech. Total revenues compare to $39,000 in Q3 of 2008 and $7.5 million in Q2 of 2009, representing an 8% sequential increase, but somewhat below our estimates of $9.0 million for the quarter. Gross profit came in at roughly $0.4 million resulting in declining overall gross margins of 5.2% including negative gross margins for Enertech, which were attributed to as yet unrecorded in-house sales to EnerDel, lower demand due to the economic climate and the impact of the exchange rate of the Korean Won vs. the Dollar. Operating expenses of roughly $13.2 million, including Enertech’s operations, rose 51% year-over-year and 5% sequentially. As a result, GAAP net loss for the quarter was $15.8 million, up from a $9.0 million loss in the year ago period and 23% higher than net loss in the previous quarter. After adding back non-cash gains and expenses, the non-GAAP net loss amounted to approximately $13.9 million or $0.12 per share. Other developments include:

  • company now has 34 active programs including production, pilot and development programs, compared to 15 active programs in Q4 of 2008;
  • progress toward the reception of funds from the ABMI grant and a decision in ATVM loan application from the U.S. DOE that will enable Ener1 to increase battery manufacturing capacity to 80,000 EV vehicles per year by 2015;
  • announced $1.29 million contract with the U.S. Army to develop Li-ion battery systems for the hybrid Humvee – this contract makes 7 out of the company’s top 10 customer focus list that includes recent commercial programs with AC Transit, Volvo, Think, Nissan, Fisker and Japan Post; and
  • Think City backlog of 2,350 orders and an additional 2,300 LOIs and requests.


We believe that the company is continuing to build a solid pipeline of potential customers including the reemergence of Think Global. This pipeline will likely provide the company with significant revenue growth beginning in Q4 of calendar 2009. We anticipate revenues of $90 million for calendar 2010. With this revenue potential, we believe there is a high likelihood that the company could breakeven on a cash flow basis late in 2010. The expected ATVM low cost loan will enable further capacity expansion and market credibility. As such we are reiterating our Buy rating and target price of $8.00.

 

 

 

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