Hardman & Co Research
Hardman Talks Video | Surface Transforms
On 15 September 2021, the Surface Transforms' management team gave a presentation to investors on Hardman Talks. Watch it here: https://youtu.be/8nx76kCudpc
The presentation explored Surface Transforms' Interim Results, which were in line with guided expectations and confirm the major revenue growth in place, offering strong gross margins, with funding in place to expand. The major OEM 8 new contract is being taken to the start of production more rapidly than typical of other OEM contracts but the start date has been moved a few months later, probably just into 2022. The overall quantum is not affected; indeed, Surface Transforms indicates the risk is distinctly on the upside here. The new manufacturing strategy announcement of 2 September 2021 pointed to management's revenue profile expectations: "at the time of the fundraising we said that we thought there could be sufficient demand to fill the Knowsley factory by 2025 (£75m sales), albeit these projections are still uncontracted.we have now concluded that we may want this capacity by 2024″. Management states £50m pa sales is currently indicated as the potential, which is derived exclusively from current customer discussions and carry over trade (namely new models from existing customers). By 2024, £25m pa sales is indicated under current live contracts, with much more anticipated on top of this from imminent new contracts.
This is a knowledge company, with high growth in a high growth market. Research expenses, including employees to PhD level, have always been a strong part of the equation to underpin growth. Surface Transforms is an applied metallurgy, chemistry and manufacturing process. 1H21 R&D increased 32%. There is only one competitor, a monopolistic supplier with 97% of the global market, falling to 93% next year. There are cogent arguments that this competitor product is outperformed by the ST product. There is no indication of a commercial third supplier and lead times are very many years; thus, additional competition would appear to be many years off.
Watch the recording: https://youtu.be/8nx76kCudpc
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