Symphony Environmental Technologies plc (LON:SYM) has announced new orders and a global expansion of d2p anti-insect technology sales to Rivulis, a global leader in drip irrigation products and solutions. The company has placed orders valued at more than $340k this month which follows sales in 2021a of $65k, and $130k during H1 2022e. Rivulis is using d2p for anti-insect protection for pipework. This announcement follows the supply agreement signed late last month with Grupo Bimbo, a large bakery group, for d2p additive applied to bread packaging film. For the moment, given the uncertain macro environment and inflationary headwinds we leave our estimates unchanged, but clearly commercial momentum is accelerating. We will update estimates as needed with the half year earnings due in September. Our DCF-based valuation is 35p, indicating good potential upside to the current share price of 17.5p.
Ramp-up in orders for d2p anti-insect technology – Rivulis (www.rivulis.com) is a global leader in drip irrigation products and solutions. The company has placed orders for d2p “AI” exceeding $340k this month which follows sales in 2021a of $65k, and which doubled to $130k during H1 2022e. SYM’s collaboration with Rivulis started in December 2017 after the Group’s R&D department created a masterbatch with anti-insect properties which could be put into plastic products at the point of manufacture. Since then, SYM’s technical team has supported Rivulis in the development of a reportedly unique range of irrigation pipes for farmers and growers. Plastic irrigation pipes and drip-tapes are an effective way to deliver water to growing plants, but valuable water was being lost because insects were puncturing the pipes. By incorporating d2p AI into its products, Rivulis has significantly reduced the damage caused by insects, and the amount of water being lost. This is particularly of benefit in dry areas of the world. SYM expect Rivulis to place further orders for d2p AI before the end of the year. SYM’s innovative d2p AI technology can be used in water pipes, and in any plastic articles and surfaces in homes, schools etc. to defend against insects, many of which can spread diseases.
Recap on d2p product supply agreement with Groupo Bimbo – SYM announced an exclusive supply agreement for its d2p antimicrobial technology with Grupo Bimbo (grupobimbo.com) on 28 June. In part this agreement stems from the exclusive regulatory approval secured from the Food and Drug Administration in the USA in 2020 and from Health Canada in 2021, for use of d2p in bread packaging plastic films. Grupo Bimbo has asked SYM to supply d2p for its nominated bread packaging manufacturers across the American continent for a period of three years. Anticipated revenue has not been disclosed but we believe, given the size of Grupo Bimbo’s operations (i.e., $17bn of annual revenues, and probably 20% share of the USA packaged bread market), there is potential for significant additional sales for SYM over the coming years.
Outlook and Zeus estimates – Symphony Environmental reported full year results in late March (see: Solid progress despite challenges, 31 March 2022). At the time, the outlook statement was cautious but positive. Management stated that trading had started to improve following a slow start to the year. Continuing high shipping costs and delays remained a concern but some raw materials costs had started to reduce. Overall, the Board stated that it was confident that commercialisation and financial performance would be much stronger in 2022e. We think the announcement today and for Grupo Bimbo a week ago are validation of this positive outlook on commercialisation and the pipeline.
Summary financials
| Price | 17.5p |
| Market Cap | £31.4m |
| Shares in issue | 179.3m |
| 12m Trading Range | 13.7p–28.9p |
| Free float | 38% |
| Next Event | H1 – September |
Financial forecasts
| Dec. y/e (£m) | 2021a | 2022e | 2023e | 2024e |
| Revenue | 9.2 | 11.9 | 14 | 16.6 |
| Gross Profit | 3.6 | 5.1 | 6 | 7.1 |
| Adj. PBT | -1.5 | 0 | 1.1 | 2.1 |
| EPS (p) Adj. | -0.8 | 0.1 | 0.7 | 1.2 |
| DPS (p) | – | – | – | – |
| Net cash/(debt) | -0.3 | -0.2 | 0.7 | 2.6 |
| P/E, x | -30.1 | – | 26.1 | 14.6 |
| EV/EBITDA, x | -24.9 | – | 33.4 | 15.4 |
