09. December 2019 | 12:35 CET
BMW, Daimler, Volkswagen - GBC's buy recommendation for retrofitter dynaCERT
The German automotive industry is facing major challenges. Customers want vehicles with performance and range, but politicians have persuaded the industry to manufacture and market economical engines. What happens if the manufacturers' offerings do not meet the wishes and needs of the market? Nothing more and sales collapse. The consequences of this misguided policy will become visible in the coming years. The demand for new cars will decrease with further tightening of emission standards and the holding period of existing vehicles will increase. At the same time, the loss in value of vehicles with internal combustion engines is unlikely to remain as high. GBC Research today published an update on a study on an exciting retrofit with hydrogen technology for internal combustion engines, confirmed the buy recommendation and raised the price target.
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ISIN: CA26780A1084 , DE0005190003 , DE0007100000 , DE0007664039
Hydrogen makes diesel greener
The Canadian company dynaCERT Inc. produces and sells a hydrogen technology to reduce carbon dioxide emissions for use with diesel engines. As part of the growing global hydrogen economy, its patented technology generates hydrogen and oxygen on demand through a unique electrolysis system and delivers these gases through the air intake to improve combustion, resulting in lower CO2 emissions and higher fuel efficiency.
The technology is designed for retrofit and for use with different types and sizes of diesel engines, including road vehicles, refrigerated trailers, off-road construction, power generation, mining and forestry equipment, ships and locomotives.
Well-known partner in Europe
With the MOSOLF Group dynaCERT could win another strategic partner. MOSOLF is one of the leading system service providers for the automotive industry in Europe. The range of services includes logistics, technology and service solutions, which are implemented with the help of a Europe-wide location network and a multimodal carrier fleet.
MOSOLF has 38 technical and logistics centres, 1,000 special vehicle transporters and achieved sales of EUR 417 million in 2018. MOSOLF has already ordered 1,000 dynaCERT HydraGEN units for the year 2020 and will also serve the European market as a dealer.
Passenger car market in Europe
MOSOLF and its subsidiaries plan to become distributors and installers of HydraGEN products in Central Europe. As part of the cooperation, negotiations have also begun for a joint venture in which MOSOLF and dynaCERT will jointly develop, finance and certify the HydraGEN technology for the European passenger car market. The analysts of GBC see an extensive market potential in the cooperation. This could make the European roll-out even more dynamic.
Billionaire joins in
Eric Sprott's acquisition has also made headlines in recent weeks. The billionaire Sprott is one of Canada's best-known commodity investors and his commitment to dynaCERT should have brought him into the spot light. Sprott is now one of the major owners of dynaCERT with a 10% ownership. Sprott subscribed 28 million shares at a price of CAD 0.50 within the scope of a capital increase and thus brought CAD 14.00 million fresh liquidity into the cash of the growth company.
Technology without competition
There is currently no known competitor on the market other than dynaCERT that could offer fuel savings and at the same time generate emissions certificates. Within a few years, this system for distributing the revenue from emission allowances could exceed the revenue from the sale of HydraGEN equipment.
The scheme will also exempt the sale of HydraGEN and its dependence on the price of oil, allowing fast amortisation. In the future, this business could generate an annual turnover of CAD 500 to 1,000 million - depending on the CO2 price.
Ecosystem for transport industry
The company has successfully developed a range of products that can function as a stand-alone ecosystem for the transportation industry, including emission reduction, fuel efficiency and a fleet management solution. In addition, the customer will benefit from a stable source of revenue in the future through the emissions certificate program. **Each product alone is unique.
According to GBC's experts, dynaCERT is currently significantly undervalued and they have raised their previous price target from CAD 1.90 to CAD 2.00. Given the fact of the high upside potential, they award the Rating BUY.
The complete update of GBC Research is available here: