Company: Earthrenew
Listings: CSE Canada , Frankfurt and US OTC
Tickers: ERTH / VVIVF / WIMN
Market cap at time of publication: $20 MCAD
Stock price at time of publication: $0.14 CAD
Business: Regenerative agriculture

ESGFIRE comment: One of our largest portfolio holdings , Earthrenew has had a though share price development along with the rest of the market this year and is currently down 24 % this year, which is actually better than most indexes have performed.

We are therefore happy to present that analyst firm Eight Capital as of september 1st 2022 has initated a coverage of Earthrenew with a 0.45 CAD price target which implies over 200 % upside to the current shareprice. This price target has been conservatively calculated by Eight capital using a 2.25 X multiple of EV/Sales for 2022. Earthrenew peers are traded at 4X EV/Sales. Patience is a key to realizing large gains and we have every hope and confidence that management of Earthrenew will execute on their growth plans.

We have included a small section of the new analysis from Eight Capital below. Should you wish to read the full analysis you may contact us at and we can email it to you. NOTE when this analysis was posted the share price was 0,17 CAD hence the discrepancy between our implied upside potential and what’s written in the analysis below.

“We (Eight Capital) are initiating coverage on EarthRenew Inc. (“ERTH”) with a BUY rating and a
C$0.45 per share target price, which implies a 143% return to target.

ERTH is in
the process of re-branding by changing its name to Replenish Nutrients at this
time. Key facets of our recommendation include:

• Flourishing demand for regenerative fertilizer. We are going through a
perfect storm of global food insecurity and climate crisis — both of which
regenerative fertilizer can help solve. The global regenerative agriculture
market is expected to more than triple by 2030 to US$24 billion (14% CAGR)
according to market research firms such as Polaris, with regenerative
fertilizer playing a prominent role. Consumers and industry are becoming
increasingly focused on regenerative agriculture, with significant investments and
meaningful corporate commitments being made.

• Growth strategy. Currently, ERTH’s sales are only limited by capacity. ERTH
has road-mapped its plan to grow plant capacity by >5x by 2025, which we
forecast will drive revenue growth of nearly 10x. This growth is well-defined,
and will be achieved by expanding the capacity and capabilities of a site in
Alberta, and by breaking ground on a greenfield plant co-located with a
Potash mine in Saskatchewan.

• Deeply-rooted environmental attributes. In our view, regenerative
agriculture is a lesser-known ESG investment that has meaningful
environmental attributes. In addition to these environmental qualities, which
include CO2 sequestration and reduced fertilizer-related GHG emissions,
regenerative agriculture provides investors with exposure to the resourcescarcity thematic, and it boasts strong near-term cash flow and margins.

• Strong partnerships. ERTH has established key upstream partnerships to
secure the raw material feedstock required for their regenerative fertilizer
products. The company has long-term agreements for phosphate, biochar
and potash as well as plans for a major 200 ktpa facility to be co-located at
a K+S Potash mine, which we forecast will be commissioned in 2024.

• Management team. The EarthRenew team has a good combination of
leadership experience and technical strength. We expect the team, which
includes decades of product development and fertilizer research, as well as
the creator of Biosul and ERTH’s current product line, will be instrumental in
navigating the next several years of growth.

Target price methodology. Our target price is based on a 2.25x EV multiple of
our 2022E revenue forecast, which is a premium to the 1.0x multiple at which
the company currently trades. However, when taking into account ERTH’s growth
prospects, and given where peers trade, we estimate that ERTH should demand
a nearly 4.0x multiple (see Figure 7). We are exercising conservatism around this
multiple (instead using a 2.25x multiple) to account for the company’s early
stage, its need for external capital to achieve our forecasted growth (69% revenue
CAGR from 2021 to 2025), and the concurrent need for farmer adoption to
mirror capacity growth

Estimates 2021A 2022E 2023E 2024E
Revenue ($mm): $12.3 $28.6 $28.5 $47.4
Adj. EBITDA ($mm): -$2.0 -$0.1 $0.5 $2.5
Adj. EBITDA Margin: -16% 0% 2% 5%
Valuation 2021A 2022E 2023E 2024E
EV/Revenue (Tr.) 2.8x 1.0x 2.1x 1.9x
EV/EBITDA (Tr.) -17.9x -468.7x 122.0x 35.7x

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