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9
EcoSynthetix is signaling that big demand for its green products is nearing
Posted by: Gerry Wimmer
5/9/2021
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Shares are up 185% in value and EcoSynthetix (TSX: ECO) may still be the most undiscovered green stock in North America.



It has been 13 months since Investorfile introduced EcoSynthetix as one of its Top Ideas in an April 2020 blog post (See: EcoSynthetix is a value buy stock with green products and loads of cash). From the date of our post until today, the stock price of the Company's shares is 185% higher. Given the significant price appreciation during the past year, one would think the Company has garnered a lot of investor attention. But, in our opinion, EcoSynthetix may still be the most undiscovered green stock in North America and now the Company is on the verge of windfall in revenue growth from the sale of its green products to multinational corporations.

Based in Burlington, Ontario, EcoSynthetix Inc. (TSX: ECO – C$4.84) is a renewable chemicals company specializing in bio-based materials that are used as ingredients to produce a wide range of "green” end products. They offer a range of sustainable engineered biopolymers, commercial-ready products that are cost-competitive and exhibit similar performance characteristics compared to the non-renewable products they replace. This allows their customers to provide greener alternatives for their products by reducing their use of harmful materials, such as formaldehyde and styrene-based chemicals.

EcoSynthetix has developed green technology platforms that produce biopolymer products manufactured from naturally derived feedstocks. The biopolymers the Company manufactures replace toxic adhesives (glues) that historically have been used in everything from particle board used in furniture to hair gel, and more.

Fortunately for EcoSynthetix, times have changed and there is currently a significant movement by major consumer product companies to achieve climate neutrality by offering to produce products that use green inputs alternative such as a non-toxic and bio-based glue.

DuraBind biopolymers produced by EcoSynthetix, is a green binder system used in the production of wood composite panels. DuraBind is a sustainable no-added-formaldehyde (NAF) solution for use in the global wood binder market. The pace of change is accelerating for the use of NAF binding solutions to decrease the climate footprint in the production of wood composite panels, especially those used in home furniture products and surfaces.

The Company has already publicly disclosed that the major laminate flooring and wood materials manufacturer, the Swiss Krono Group, has a new line of environmentally friendly particle boards. They use EcoSynthetix’s DuraBind as the bio-based adhesive to respond to growing consumer demand to use green-based materials in its products. While the news of Swiss Krono being an EcoSynthetix customer is not new, Management commented (in Company’s recent Q1 investor call) that, for the first time, product demand from Swiss Krono is beginning to represent quite a meaningful part of the Company’s new business, and it is optimistic this growth will be reflected in its financial results in a more material way later this year and beyond.

But this is not the only new business opportunity for EcoSynthetix’s DuraBind product. We noted in our last blog post that the major furniture retailer IKEA has publicly stated that it is putting a great deal of effort and resources into lowering formaldehyde emissions, targeting the adhesive used in producing the wood-based products that they sell.

EcoSynthetix’s Management has acknowledged that a major strategic partner (we strongly speculate that to be IKEA) performed an extensive evaluation of the Company’s DuraBind product. Again, in the Company’s recent Q1 investor call, Management made comment that it hopes to soon to be able to speak about this major strategic partner in the wood composite market. Management has acknowledged that this partner is now ordering the DuraBind product and it is getting incorporated into its partner’s furniture end products. We suspect a continuation of the business relationship with IKEA could lead to a windfall of revenue growth for EcoSynthetix beginning later this year and beyond.

The paper and wood composites market is not the only near-term growth drivers for EcoSynthetix. There is serious commercial potential for EcoSynthetix's green solutions in the personal care market, as the Company’s biopolymers can act as the fixative agent in hair gel formulations and is a drop-in replacement for polyvinylpyrrolidone (PVP), which is a petroleum-based product currently, used in most hair fixative formulations.

In 2019 EcoSynthetix signed an exclusive marketing and development agreement with an unnamed multinational company (we speculate that it is Dow Chemicals) to launch an all-natural line of hair care products. It is now expected that the hair gel products developed under this agreement, which use the Company’s biopolymer solution, will be available on store shelves in the second half of 2021. This all-natural line of hair care products is currently being marketed to major hair care brands.

We suspect that EcoSynthetix's relationship with Dow will expand beyond hair care products for the development green home care products.

In Q1 of 2021, the Company reported revenues of US$3.67 million, derived mostly from sales in its legacy market, paper coating. But, we feel EcoSynthetix may be at that inflection point and that the sales mix for the reminder of 2021 will begin to have a higher contribution from the wood composite (Swiss Krono, IKEA) and hair care (Dow) markets. If this occurs, Investorfile is of the opinion that the Company and the stock will garner attention from a much wider investor audience as a green investment play. If this is the case, the stock price still has significant upside potential and will trade at higher valuation levels.

Today the Company remains extremely well capitalized with US$41.9 million in cash and no debt on its balance sheet.

EcoSynthetix Inc. has approximately 57.2 million shares outstanding.

Company website: www.ecosynthetix.com

Author Ownership Disclosure: TSX: ECO – Yes


Investorfile's share price accumulation target of $2.20 for EcoSynthetix Inc. was initially reached on June 5, 2020.


Read Disclaimer:

This article is for informational purposes only. This article is based on the author's independent analysis and judgment and does not guarantee the information's accuracy or completeness. The information contained in this article is subject to change without notice, and the author assumes no responsibility to update the information contained in this article. The information contained within this article should not be construed as offering of investment advice. Those seeking direct investment advice, should consult a qualified, registered, investment professional. This is not a direct or implied solicitation to buy or sell securities. Readers are advised to conduct their own due diligence prior to considering buying or selling any stock.

Investorfile.com is not engaged in an investor relations agreement with EcoSynthetix Inc. nor has it received any compensation from EcoSynthetix Inc. for the preparation or distribution of this article.

The author of this article has acquired and may trade shares of EcoSynthetix Inc. through open market transactions and for investment purposes only.

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Hi Gerry, Your philosophy is focused on principles that have been shown to produce above average results over time and your record has clearly proven that. Congratulations on a great blog and thank you for the hard work that you do in sharing and updating your ideas; it is much appreciated.