Nanoco Group (LON:NANON) has received its first commercial order for CFQD resin from the company’s film partner, Wah Hong. Just as importantly, the CFQD product is now being evaluated by 13 major OEMs for 16 programmes. This gives confidence that revenues are now set to ramp up, as more programs progress through the pipeline and shipment volumes increase. We leave our estimates unchanged and highlight that, while it is still early stages, it does not take aggressive assumptions for earnings to scale and the rating to look very inexpensive. We believe a substantial re-rating upwards would be justified as support for our estimates further solidifies.
Seminal moment – pipeline suggests more to come
This is a seminal, and long awaited moment in Nanoco’s evolution. The commercialisation process has been protracted, involving a number of steps from initial NDA/sales approval, technical specification, technical approval (with a number of iterations) and then commercial negotiations. The good news is that the company is progressing 16 programmes through this commercialisation funnel with 13 OEMs up from 14 and nine respectively in April. Of these we understand that at least four programmes (each of which can supply into multiple models) have progressed to the technical approval stage. Consequently, we should see more programmes progress to commercial orders over the course of this calendar year. Notably, these figures exclude developments with Dow – which according to press reports is now working with two film manufacturers – Kolon, KDX and Merck (NYSE:MRK), which is aiming to have its plant operational by the end of 2018.
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