On Monday, National Bank Financial increased its price target for 5N Plus Inc (VNP:CN) to C$8.00, up from the previous C$6.50, while retaining an Outperform rating on the stock. The firm highlighted the company's pivotal role in the production of First Solar (NASDAQ:FSLR)'s CdTe panels, noting that 5N Plus has been consistently securing larger contracts, approximately every two years. The most recent agreement saw a 50% increase in volume.
The firm also pointed out 5N Plus's efforts to diversify its customer base, with new clients such as RayGen, an innovative solar and storage company, which is expected to scale up its operations. Additionally, 5N Plus's acquisition of AZUR in late 2021 has been successful, with rapid growth through capacity expansions and new contract wins.
The analyst anticipates that next year, the company could generate approximately C$120 million in revenue, which would be double the run-rate of 2021 and come with improved margins as older contracts expire.
5N Plus's significance extends beyond its commercial activities, as it is one of the few suppliers in the West of products based on critical materials like Tellurium. The company's importance is underscored by a recent grant of around C$14 million from the Department of Defense (DoD), intended for materials related to satellite construction. This aspect of 5N Plus's operations has been deemed a matter of national security.
The confidence in 5N Plus's future prospects has led National Bank Financial to adjust its valuation of the company. The new price target is based on a 9x EV/EBITDA multiple on the company's 2026 earnings projections, which was previously based on 2025 earnings estimates. This valuation is slightly below the peer average, which trades at 10x on forecasted second-year earnings.
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