Nanoco Group plc (LON:NANO) is the topic of conversation when Edison Group’s Director of TMT/Industrials Anne Margaret Crow caught up with DirectorsTalk for an exclusive interview.
Q1: Nanoco Group has announced they’ve received a fourth work package from a major European customer, what’s the work package for?
A1: The work package is with the company’s important European electronics customer and it’s for the delivery of an enhanced and scaled up of its technology. The customer is undisclosed but it’s likely to be ST Microelectronics because they gave a paper at The Society for Information Display in 2021 that was about using quantum dots for shortwave infrared imaging. They noted at the time that they were ready to commercialise the technology and we know that NANO is one of the few companies globally that makes quantum dots.
So, the company’s nanomaterials are probably being used in this work package to extend the sensitivity of silicon sensors into the infrared region. That opens up the potential for cost effective sensors for use in autonomous vehicles and being able to put sensors under the screen of a mobile handset instead of having to put them under a cut-out or notch which eats into the display area.
Q2: What is the significance of the award?
A2: It’s important to note the agreement is for an enhanced and scaled up version of its technology and that’s great because it indicates that the performance the customer has achieved so far with the company’s nanomaterials merits scaling up the process at this point.
Getting to that particular of scale up is consistent with the company’s goal of having visibility of production revenues during calendar H2 2022. This is important because their cash runway for ordinary organic business activities only extends into the second half of the current calendar year.
Q3: That leads me to the financial implications of the award.
A3: Well, the size of the award hasn’t been disclosed, though it was sufficient for the group to guide to a year-on-year increase in revenues for the financial year ending July 2022 whereas previously it had guided to a year-on-year decrease.
We still won’t see big revenues until the customer, ST probably, decides to launch electronic sensors containing the company’s quantum dots and that in turn is going to depend on one or more of ST’s own customers deciding to launch products containing those sensors, and quantum dots go a long way.
So, whilst the company’s existing fabrication facility could potentially output £100 million’s worth of nanomaterials a year if it was working 24/7, making enough nanomaterial to put sensors on a major handset model, sensors including their quantum dots, would take a single shift of production, working 5 days a week, which would be equivalent to £15-£20 million of revenues. That’s if it’s an application requiring very many sensors, if the first application is a niche product such as augmented reality or virtual reality glasses then annual revenues would be a lot less than that £15-£20 million.
There’s a good chance that having one product out in the market with cost effective infrared silicon sensors in it would encourage other electronic companies to start using quantum dot-enhanced silicon sensors as well.
Q4: Are there any implications with regards to Nanoco Group’s valuation?
A4: In our opinion, it doesn’t really change it because although the award of this fourth work package in the series is clearly really good news, because it shows the company moving closer to commercial production, it still hasn’t got to commercial production yet.
Until that definitely happens, we believe that much of the company’s value still lies in a satisfactory resolution of the patent infringement dispute with Samsung. The value of the potential payout in that dispute to the company hasn’t been disclosed but we’ve calculated that the lost revenue in the United States alone, that’s attributable to the patent infringement, to date could be in the region of $200-$250 million or more. Any damages awarded could also make an additional allowance for future sales for TV’s that have got their quantum dots in them and even a possible uplift for wilfulness.