DG Innovate is highly innovative with significant potential for upside

DG Innovate Plc

DG Innovate plc (LON:DGI) is an advanced research and development company pioneering sustainable and environmentally considerate improvements to electric mobility and storage.

Recently the company announced it has signed a Collaboration Framework Agreement with tier one commercial vehicle and off-highway axle suppliers, BRIST and BASE. We caught up with Charlie Cullen Research Analyst WH Ireland for his thoughts on the news.

DGI has announced the signing of a collaboration agreement with two Tier 1 heavy vehicle system suppliers, what does this mean for the company?

In our view, the agreement represents a significant milestone for the company, being the first firm expression of commercial interest in their drivetechnology in the automotive sector. Not only does the collaboration provide a potentially faster route to market through the suppliers’ existing customer base, but it is also a very strong validation of the company’s claims to have a highly innovative and commercially relevant technology from companies who are highly knowledgeable in the industry.

How do you see the outlook for the company?
Beyond the recent agreement with BASE and Brist, DGI have a number of commercial opportunities ongoing, most notably with Tier 1 automotive supplier Meritor and the MoD. There are clearly risks around the timing and successful conversion of these projects, which are still to crystallise; however, it’s positive that the company are diversifying with other, potentially faster moving, customers like BASE and Brist. We see funding as a key risk – by our estimate, the company will have to seek some source of funding within H1 2023.  However this is not new news.

What do you hope to see in terms of news flow over the coming months?
DGI are targeting delivery of the next iteration of their electric drive to Meritor in Q2 2023, which we believe will be a key milestone, with news of next steps potentially announced following delivery. Developments from other ongoing projects  are not guaranteed in the near term, but we would expect some further updates are likely from some of these in the coming months.

How do you see the company in terms of an investment case?
DGI has developed and retains patents and IP relating to highly innovative technologies, which address multi-billion £ addressable markets in the electric vehicle and sodium ion battery spaces. With ongoing relationships with large prospective customers, there is significant potential for upside should any of these relationships convert to commercial sales, not to mention a near-term route to market through retrofit opportunities in heavy vehicles looking to electrify.

DG Innovate plc (LON: DGI) is an advanced research and development company pioneering sustainable and environmentally considerate improvements to electric mobility and storage.

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