Microvast Holdings $MVST 🚀
Following the last earnings call, Microvast Holdings ($MVST) has not just held steady but has shown signs of robust momentum, indicating a compelling narrative for future growth and market dominance. Here are the facts that underlying my conviction:
1. Record Revenue and Profitability:
- The company reported a record quarterly revenue, showcasing a significant year-over-year increase. This financial performance marks a pivotal moment, as it's the first time $MVST has entered profitability, demonstrating not only growth but also operational efficiency.
> $101.4 million of revenue were reported in Q3, a 26.6% YoY increase, net income stood at $13.2 million.
2. Gross Margin Improvement:
- There was a notable improvement in gross margins, which is a clear indicator of Microvast's ability to scale its operations while controlling costs. This margin expansion is expected to continue as the company leverages its growing market presence.
> Their gross margin increased to 33.2% in Q324.
3. Strong Cash Position:
- With substantial cash reserves, Microvast is in a solid position to fund further growth initiatives, including R&D, expansion of production capabilities, and strategic acquisitions that could widen its market reach. As of Q324 cash and short term investments stood at $104mn.
4. Expansion and New Ventures:
- The company has plans for enhancing its production capacity, particularly at its Huzhou facility, and is actively expanding in the U.S. commercial vehicle segment. The anticipated financing for the Clarksville facility could further amplify its production scale, leading to increased market share.
5. Guidance for Future Revenue:
- Microvast has provided optimistic guidance for the next quarter and the year, projecting significant revenue growth. This confidence in future earnings is backed by current contracts and a growing order book, suggesting a strong demand trajectory. Revenue guidance for Q4 > $90-$95 million. If profitability continues, expect a significant re-rating of the stock.
6. Analyst Optimism:
- Post-earnings, analysts have been adjusting their price targets upward, reflecting optimism about Microvast's growth potential. The stock's valuation, when compared to peers or based on future revenue projections, suggests there’s room for further appreciation.
8. Investor Sentiment:
- The market's response post-earnings, with the stock touching a 52-week high, reflects strong investor confidence. The stock's performance, combined with low short interest and a significant volume increase, shows that both retail and institutional investors are betting on its upward trajectory.
9. Valuation:
Based on Q3 2024 financial results, annualised, this provides a revenue value of 355m and based on industry context for valuing companies, it is to be between 5-10x .
Therefore, 5 x 335m is 1.775 billion USD
300m shares o/s gives a share value of 5.92
When looking at PE, with a PE ratio of 25x, this comes to 1.325 billion USD, giving a share value of 4.42
Estimated discounted cash flow value (DCF) is ranging between 5-6.50 per share
Therefore, just purely based on the current financials, the stock is heavily undervalued.
I am heavily invested in MVST and you should too as this gem is undervalued as hell. Easy 10x from current price.
Position: 21461 shares as proved in above screenshot