KULR Technology Group (NYSE-Amer: KULR) stock at current levels exposes a valuation disconnect that’s not only difficult to justify; for investors, it may be too wide to ignore. In fact, at roughly $0.41 a share on Wednesday, arguing against the path of least resistance for KULR shares being higher is a tough sell. Yes, it’s more than fair to point toward the company closing its $2.875 million underwritten public offering that priced roughly 9.3 million shares, including the underwriter’s over-allotment, at $0.35. However, with that financing complete, the more appropriate way to value KULR is from a forward-looking perspective. ( *share price on 10/11/23, Yahoo! Finance, 1:16 PM EST)
In that sense, plenty is supporting the bullish thesis. In fact, three analysts covering KULR stock present quite the bullish case, each holding a BUY rating and price targets as high as $7.00, over 1607% higher than its current price. The lowest price target of $1.20 is still bullish, representing a potential upside of 192%. And using the midpoint of the three, $3.28, from analysts that typically know much more than retail investors, a 700% gain could be in play. In other words, despite KULR going to the capital markets at a challenging time, a consensus is that its shares will continue to move higher. Appreciably so.
Still, investors don’t need to rely solely on analysts’ words. There’s plenty of evidence supporting the bullish thesis coming straight from KULR. And all of it points to a KULR shifting its growth pace from hyper to warp.
Earning Contracts With Industry Leaders
That shift is resulting from inking deals with industry leaders across multiple sectors. In October, KULR announced receiving a contract from a top-5 American electric truck manufacturer to develop newer and safer batteries for its next-generation fleet of electric trucks and SUVs. Selecting KULR is no coincidence. KULR ONE Design Solutions is more than best-in-class; it can expedite the evolution of next-generation electric trucks and SUVs that need safer battery power. That deal is good news for KULR, EV consumers, and the unnamed manufacturer.
KULR didn’t name the manufacturer. However, they did point to the company publicly forecasting a substantial ramp-up in production of its electric truck in 2024 and, more importantly, from a KULR and its investor’s perspective, will use KULR’s superior battery-safety technology and performance. Having another foot in the EV sector door matters. Research and Markets report that the US electric truck market is expected to grow at a 54% CAGR and reach $15 billion by 2030. That puts KULR in the right place at the right time. Better still, they are already signing deals, which tend to put add-on agreements into play. There’s more good news.
Prior to that announcement, KULR said it had entered into a Memorandum of Understanding with privately-held precision nanocoating technology company Forge Nano. The strategic partnership is expected to generate initial revenues between $3.5 million to $5 million, resulting from KULR ONE Design Solutions offerings with Forge Nano’s proprietary Atomic Layer Deposition coating process, which they believe will serve as a breakthrough product to serve demand from OEM partners’ batteries by providing unmatched safety and efficiency. KULR said the strategic partnership will assess Forge Nano’s premium battery cells for space and US Department of Defense applications.
Specifically, they will utilize KULR’s automated cell screening to measure individual battery cells’ voltage, temperature, and impedance, then analyze the data to identify potential issues and optimize battery cell performance compliant with the strict NASA flight specification reference points.
Value inherent to that technology is leading to additional contracts. KULR recently announced securing a third order for automated battery cell screening services from NASA. That modular screening technology allows for ease of scalability, a requirement for the forthcoming partnership that expects an appreciable uptick in screened cell sales.
A Growing List Of Value Drivers
Those deals aren’t the only value drivers in Q4 and 2024. Investors must also include in their appraisal the potential in play from the US Department of Energy’s intention to make a second round of funding available to support US battery production and recycling. That includes a $3 billion in Bipartisan Infrastructure Law funding open to American businesses seeking to produce North American–made batteries, putting KULR, through its partnerships, well-positioned to capitalize on the opportunity by ensuring that the US-based battery production value chain redefines industry standards in battery safety and performance.
Agreements don’t end with the Department of Energy. KULR has inked other revenue-generating deals with NASA, the US Air Force, and the Department of Transportation. On the private sector side, they have working relationships with Boeing (NYSE: BA), Ball Aerospace (NYSE: BLL), Airbus (OTC: EADSY), Lockheed Martin (NYSE: LMT), Leidos (NYSE: LDOS) and Raytheon (NYSE: RTX). That’s just naming a few. As one would expect, KULR’s client list is growing as companies and agencies understand the value contribution KULR adds regarding battery safety.
Plenty supports the expanding interest. Foremost is that when it comes to battery safety technology, KULR is the best in the sector after developing, manufacturing, and licensing next-generation carbon fiber thermal management technologies for batteries and electronic systems. They’ve developed breakthrough cooling solutions for NASA space missions that have brought its technology to Mars. KULR battery safety technology is also on the International Space Station. And with its strong IP portfolio protecting its vital technology, more likely than not, those deals will lead to others. In fact, from a battery-safety interest, KULR could score the lion’s share of battery-safety integration sales with leading aerospace, electronics, energy storage, 5G infrastructure, and electric vehicle manufacturers to make their products cooler, lighter, and safer for the consumer.
Impressive Revenue Growth Couples With Decreasing Overhead
Still, appraising KULR requires more than recognizing its game-changing battery safety technology. Factoring in growing revenue streams is critical to the calculation. In that respect, KULR delivered an excellent performance for its Q2, ending on June 30, 2023. Revenues increased to $2.7 million from $0.6 million reported in the same period last year, an approximately 360% increase. Contract Services revenue soared over 2300%, resulting from contract services revenue of roughly $0.7 million versus $0.03 million in the prior year. Product revenue was also impressive, posting approximately $2.0 million compared to $0.6 million in the same period last year. That increase is an over 250% spike.
The best part of the report is that revenues are starting to fall faster toward its bottom line, with gross margins increasing to 37% compared to 28% in the same period last year. KULR expects those margins to hold, even guiding them to reach the low 40% range in coming reports. That fits well with its ongoing business, including maximizing its $1.13 million contract award from the US Army to develop next-generation high-energy battery packs employing the KULR ONE Design Solutions. Other revenues from its partnership with a world-leading provider of drone-powered package delivery services will get the same benefit. For them, KULR is providing its K1-DS platform and proprietary technology to develop high-capacity lithium battery packs for last-mile delivery, recognized as the most expensive and time-consuming part of the shipping process. That’s not all.
KULR is accruing value from an additional development contract from a United States Armed Forces branch. In that deal, KULR is hired to develop high-energy battery packs for uninterruptible power supplies to mobile command centers. These contracts are excellent examples of how the KULR ONE Design Solutions platform provides KULR clients and partners with unique, comprehensive solutions that management believes result in the most comprehensively packaged battery safety solutions for high energy and demanding applications.
Simple Math- More Clients, More Revenues
From a client quality perspective, KULR is working with a Who’s Who of market leaders, providing safe battery testing solutions to a top 5 global manufacturer in the electric vertical take-off and landing (“eVTOL”) sector. These tests are expected to be completed by the end of Q3 and serve as the predicate to advance eVTOL battery safety further ahead of the federal regulator’s expectations to present certification rules for the emerging eVTOL air taxi market.
KULR is also expanding its SafeCASE™ product line for electric bikes and the consumer e-mobility market, bringing to the consumer level the same patented technology it provides NASA to protect astronauts on the International Space Station and crewed space missions. Keep in mind that there are over 300 million e-bikes in use worldwide, with that number compounding at estimated double-digit percentages. As consumers learned with hoverboards, the threat of battery-related fires is more than real; it can be fatal. Thus, KULR’s proactive stance to engage this market opportunity can lead to a potential revenue windfall.
Know this: if KULR’s solutions are robust enough to be used by NASA and in the International Space Station, having it as a part of all battery safety could get mandated faster than many think.
Working Partnerships Expand KULR’s Reach
As one would expect, KULR’s expertise in battery safety isn’t unnoticed in other sectors. Their breakthroughs in lithium-ion battery safety technology have led to deals with many of the largest car companies in the EV sector, including Andretti Technologies, to provide thermal management and battery safety solutions to its electric SUV extreme racing team Andretti United Extreme E. That deal can also benefit from joint research to co-market proprietary battery products and solutions. The EV sector isn’t alone in supporting higher KULR valuations.
KULR is working with Leidos to provide battery safety technology and with Heritage Battery Recycling to offer the same and, at the same time, open doors of opportunity to work with transport and delivery companies like United Parcel Service (NYSE: UPS) and FedEx (NYSE: FDX) due to earned certifications. Currently, those allow for the shipment of batteries utilizing the KULR Safe Case products through UPS’ vast shipping network. It also allows its US DoT-compliant “Safe Case” to be used as a safe and reusable shipping container for Li-Ion battery transportation up to 2.1KWh. That allowance provides KULR’s major recycling partner with a safe shipping container that can handle batteries above 300Wh. And with billions of lithium-ion batteries needing proper disposal, it could significantly steepen KULR’s revenue curve.
A Bullish Thesis Supported
Combining the sum of KULR’s parts with deals made, the value proposition exposed by a sub-dollar share price may be better described as a window of opportunity. Still, don’t expect that window to remain open much longer. KULR is doing the right things with the right products at the right time to create significant shareholder value. In fact, if KULR didn’t tap into vulture financing, more likely than not, the KULR share price would be closer to price targets modeled by analysts.
In that sense, even the lowest estimate represents a substantial gain. Thus, just as analysts do, understanding the totality of KULR instead of staying focused on a single capital raise exposes the current KULR share price as an opportunity rather than a deterrent. But, like many, investment opportunities open and close quickly. In other words, considering deals made, revenue growth, IP-protected best battery safety technology, and its impressive and growing client list, the sale price in KULR stock may not last much longer.
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