Did This Gold Producer Knock It Out of the Park Again?
Research Report

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Disclosures for Atrium Research, Dynacor Group Inc., November 14, 2024

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Atrium Research analysts Ben Pirie and Nicholas Cortellucci, in a research report published on November 14, 2024, maintained their Buy rating on Dynacor Group Inc. (DNG:TSX; DNGDF:OTCMKTS) with a target price of CA$7.50. The report follows Dynacor's Q3 2024 financial results, which showed significant year-over-year growth. The report was titled "Dynacor Group — Knocked it Out of the Park . . . Again."

The analysts highlighted the strong quarterly performance, stating, "DNG reported another record quarter, posting 20% YoY sales growth and 50% YoY EBITDA growth due to the increased gold price and record levels of ore processed." Sales reached $76.2M, significantly beating their estimate of US$61.6M.

Regarding operational performance, the analysts noted, "Operationally, the Company hit record tonnes processed, averaging 519tpd for a total of 47,721t, compared to 472tpd and 42,935t in Q2/24, respectively."

The report highlighted Dynacor's strong financial position, with the analysts stating, "Dynacor again improved its balance sheet, with US$42M in cash (up from $35M last quarter) with negligible debt, while also repurchasing shares."

The analysts emphasized growth initiatives, particularly noting Dynacor's planned expansion into West Africa: "On October 11, DNG announced its plans to construct a gold ore processing pilot plant in the Kédougou region of eastern Senegal. This is a key initiative for the Company as it will not only increase production but also better diversify its operations."

Atrium Research's valuation methodology is based on EBITDA multiples. The analysts explained, "DNG currently trades at 3.4x/3.1x 2024E/2025E EBITDA compared to Canadian industrials at 11.8x/10.9x and mining service firms at 4.3x/3.8x (universe average of 8.6x/8.2x), despite DNG posting one of the best sales and EBITDA CAGRs in the group."

In conclusion, Atrium Research's maintenance of their Buy rating and CA$7.50 target price reflects confidence in Dynacor's operational excellence and growth potential. The share price at the time of the report of CA$5.44 represents a potential return of approximately 37.9% to the analysts' target price, with an additional 2.6% dividend yield.