Electrovaya The Tesla Of Forklifts Gets Game Changing Walmart Repeat Order

Summary

• Electrovaya manufactures and sells Lithium battery packs for forklifts. It is a huge market and is converting away from Lead Acid batteries and gas engines.
• Electrovaya manufactured Lithium batteries have ceramic separators backed by over 100 patents. They never catch fire and have other advantages such as extreme cycle life.
• Electrovaya converted a Walmart warehouse 100% to its batteries then in late 2019 got another $7 million Walmart order to convert two more warehouses 100% to Electrovaya.
• Electrovaya predicts a 100% increase in sales this Q and profitability. The market cap when this article was started? Only $18 million. Seems an excellent setup for a 10 bagger.

Electrovaya (EFLVF) is an unknown stock and company, yet to call it the "Tesla of Forklifts" is accurate. They are the leader in Lithium forklift batteries. When I started writing this article in a word processor in March it was .15 and my average cost about the same, which works out to about an $18 million market cap. On 7-10-2020 it went over $.35 already a 2+ bagger. To go to $1.50 seems possible due to several factors. 

In 2016 the stock went into favor and it more than 10 bagged in just 6 months. Notice we have even higher volume at the beginning of this rally. This is one of those stocks that can be quiet a long time and then explode upward. It is certainly in the right sector for such action as NIO and Nikola demonstrate.

The company has struggled in the past but in the last 12 months many things have gone its way.  They already had a Walmart warehouse that went 100% to Electrovaya, then in late 2019 Walmart decided to convert two more warehouses to Electrovaya which is being fulfilled now http://electrovaya.com/wp-content/uploads/2019/09/PR09052019.pdf .

Why would Walmart do that? Walmart is famous for being penny pinchers and hyper efficient. Why would they decide to 100% convert two more warehouses after the first conversion unless the first one was very successful? That is the game changer for Electrovaya in terms of market acceptance. 

Electrovaya also has converted a Mondelez warehouse. Here is the case study on that:

A financial game changer came in April when they satisfied their main liability of a $15 million convertible debenture for just $6 million!  I called Jason Roy their investor relations person because it seemed to be too good to be true. Well it was true here are the basics from their PR:

Electrovaya Amends Terms of Outstanding Debentures Toronto, Ontario – April 8, 2020 – Electrovaya Inc. (“Electrovaya” or the “Company”) (TSX:EFL) (OTCQB:EFLVF) announces that it has amended the terms of its outstanding CDN$15 million principal amount unsecured 9% convertible debentures due March 27, 2020 (the “Amendments”). Pursuant to the Amendments, the Company and its lender under the debentures, an institutional investor (the “Debenture Lender”) agreed that the Company could satisfy the entire $15 million principal amount and any accrued but unpaid interest owing under the debentures by issuing the Debenture Lender 11,111,111 common shares in the capital of Electrovaya (“Common Shares”) at a deemed price of CDN$0.18 per Common Share on or before April 3, 2020, paying the Debenture Lender CDN$2 million in cash on or before April 10, 2020, and paying the Debenture Lender an additional CDN$2 million in cash on or before September 29, 2020, an equivalent of about $6 million dollars. The Company granted the Debenture Lender subordinated security in connection with the deferred payment obligation under the Amendments. Dr. Sankar Das Gupta, the Chief Executive Officer and a director of the Company, personally guaranteed the Company’s CDN$2 million deferred payment obligation under the Amendments.

This greatly increased the safety of Electrovaya as an investment. This slide from their presentation shows the great progress they have been making:

The Raymond deal is big. They are the biggest forklift company in the world and owned by Toyota. Raymond is both selling Electrovaya batteries to existing customers and making Electrovaya batteries an option for new customers. 

Here is the presentation, it is worth reading  http://electrovaya.com/wp-content/uploads/2020/03/EVPresentation.pdf. 

Total Sales of e-forklifts: ~150,000/year in the USA. What is that in dollars for batteries? They do not publish a price list, however looking at their revenue, the fact they say they sold 350 batteries by 2019, the size of the Walmart order ($7 million) for two warehouse and guessing the forklift count for a Walmart warehouse it seems that Electrovaya gets in the tens of thousands for each battery. They do have different voltage batteries as forklifts vary in their voltage. My guess is they get about $15,000 to $30,000 a battery. 

If they got 100% of annual sales of new forklift that would be about $3 billion a year, just for new forklifts. They will not get that, but if they get just 5%? That is about $150 million a year. In their last conference call they are talking about capacity in that ballpark. 

Electrovaya Inc. (EFLVF) CEO Sankar Das Gupta on Q2 2020 Results - Earnings Call Transcript

Richard Halka

Thank you, Sankar. Revenue for the three months ended March 31, 2020 was $1.9 million, an increase of 55% over $1.3 million in the second quarter last year. But more significantly, it represents a doubling of our Q1 December 31, 2019 revenue of $900,000. The strong sequential growth is a trend we anticipate to continue as we move through 2020.

We have also provided some targets for the fiscal third quarter ending June 30, 2020. We have good visibility on revenue as orders in hand remained strong at C$14 million and our production and shipping have been growing week-by-week. We foresee strong sequential growth continuing in third and fourth quarters of fiscal 2020. 

Sankar Das Gupta

I'm just going to add that we are hoping to double our revenues this quarter and be EBITDA positive with both the costs going down, and of course, the revenue is going up.

Robert McWhirter

Okay. And you talked about the kind of the new facility can handle the increased demand as well as kind of future demand. Can you talk about the kind of current capacity as far as dollar value of sales that the existing plant as it is currently constructed could handle?

Richard Halka

I think we're very excited about the scaling up we’re seeing. And where that upper limit is, I don't think we're going to see it in 2020 because we're seeing a sort of a week-on-week shipping more and completing more. And at the level we're at now, we can easily do that doubling of sales that Sankar suggested in the next quarter and with certain efficiencies put in place, doubling again into the final quarter. We're really not seeing a capacity limitation. We're working a single shift, five days a week, so we certainly have a lot more we could do to increase our capacity here.

Robert McWhirter

Okay. So wet finger, if you take the most recent quarter, double it, you have $5.4 million, multiply that by 4, you got an annualized of $22 million, you expect further acceleration in the fourth quarter. So it sounds like an easy estimate is at least $39 worth of annualized capacity, is that a reasonable wet finger guess?

Sankar Das Gupta

Yes. And then we should do much more – as Richard said, that's really running on a single shift basis.

Robert McWhirter

Okay. And to be able to end up saying to go beyond $50 million other than a single shift, is that all that might be required to end up increasing capacity?

Richard Halka

I don't think we'll need to double the shift to go to $50 million. When we are hitting the $100 million, we'll probably need to have a second shift.

Comparative Values?

NIO has $1 billion in revenue and $17 billion is market cap, the P/S = 17 and it has a negative $1.26 EBITDA.

NKLA has $417 million in revenue and $19.5 billion market cap, the P/S = 47 and it has a negative $84 million EBITDA.

TSLA has $26 billion in revenue and $286 billion market cap, the P/S = 11 and it has a positive $3 billion EBITDA.

EFLVF has a $46 million market cap after the stock more than doubled recently (and went up even more as this article was finished) and has a $22 million revenue run-rate so the P/S = 2 and they say in the Conference Call above the Q just ended should have positive EBITDA. 

Conclusion:  

What does this all mean?  Probably in the Q that will come out next, ending June 30, they will double sales and go positive EBITDA. This is a Tesla/NIO/NKLA like story. In fact EFLVF is growing much faster than Tesla and is in the same lithium battery conversion of vehicles segment. If you compare the financial metrics Electrovaya clearly wins as a better value.  

And remember that Electrovaya seems to get about 40-50% as much for their batteries as Tesla gets for the battery and the car on their new lower end model. Yet it is so much simpler and lower investment to just make the battery.  Tesla literally uses generic flashlight batteries (check it out yourself), but Electrovaya has patent protected and much more high tech batteries that they manufacture.  

This may explain why on heavy volume EFLVF has gone up more than 60% in the last week.  How I see it is that if they pull off their short term prediction of doubling revenue sequentially again, which is likely as they delivery Walmart, the stock is a setup to 10 bag from its base of $.15 without ever having to succeed at reaching $50 million or $100 million. If it does reach $50 million in sales then it could become a super darling stock and 25 bag or 50 bag. This is all possible because the market cap is so tiny now.