Upside significant10 Feb 2024 12:49
WH Ireland note. DG Innovate (DGI) – Corporate – Equipment purchase marks big transition for growing company, consistent with recent newsflow
Market Cap £17.2m Share Price 0.17p
We view DGI’s announcement yesterday as a further critical stepping stone aligned to progress since the news on December 11th encompassing a £2.4m fund-raise and the appointment of new directors. The announcement moves the story forward, with the acquisition of new equipment which the company understandably describes as transformative – since it will allow considerably more significant numbers of Pareta® drives to be delivered (up to 1,000 units per year) as against small numbers currently; while a jet mill and furnace are being acquired in order to support DGI’s energy storage products.
Yesterday’s news follows on from the announcement of a joint development agreement with a Tier 1 supplier in the heavy vehicle market using DGI’s proprietary Pareta® electric drive system, which came soon after the appointment of the company’s highly experienced new management team, each having held senior roles within Tesla. With this and a range of other commercial opportunities currently in play, we view the company as increasingly well placed, benefiting from highly innovative technologies, a compelling market opportunity and now with further runway and a management team with significant reach within the sector.
WHI View: Yesterday’s announcement represents tangible progress being made as DGI advances towards larger scale commercial production of its innovative technologies – testament both to the impetus provided by new management and to the company’s significantly improved funding position. With the recent announcement of a joint development agreement with a Tier 1 heavy vehicle supplier affirming strong demand for their product, we view the development of a pilot motor plant as a key step towards refining a volume manufacturing process and converting commercial leads. With a large potential market and progress continuing in line with expectations, we retain our DCF-based fair value at 0.57p this morning, while noting further upside as commercial opportunities expand and development milestones are met.