NRGene Technologies : Quarterly analysis update report – Marketscreener.com
INDEPENDENT EQUITY RESEARCH
NRGENE TECHNOLOGIES LTD – UPDATE REPORT 11.12.2022
Expanding the business model in intellectual property development
Stock Exchange
transactions against income from end products; first project in the
TASE
collaboration with the Granot Group; stock price target remains
unchanged.
Symbol
NRGene Technologies Ltd (TASE: NRGN) is an AgTech company engaged in research and development
NRGN
of technology in the field of artificial intelligence, including software tools, to analyze genetic
information based on Big Data. The overarching goal is to accelerate and improve natural development
Sector
of crops and animals in the global agriculture and food industry.
HI-TECH
Sub-sector
INTERNET AND SOFTWARE
Stock Price Target
NIS 30.9
Closing Price
NIS 6.2
Market Cap
NIS 77.4 Mn
No. of Shares
12.5 Mn
Average Daily Trading Volume
72 stocks
Stock Performance (since Jan. 1, 2022)
-40.6%
Key events in Q3 2022:
Strategy – The company continues to implement the change in the business model, in the way it acts as a one stop shop for all the genomic needs of plant and animal breeders as a partner (and not only as a service provider) in the entire process of developing the varieties, including ownership (exclusive or joint) of the intellectual property ( in a model similar to the model in which drug development companies operate). We believe that NRGene is well positioned for growth due to its revenue growth potential, customer base, knowledge and new business model.
Bottom line – The company operates according to an orderly strategic plan including changing the business model and has begun expanding the business model in intellectual property development transactions against revenue from end products, within the framework of the cooperation agreement with the Granot Group. In our view, the transaction has significant leverage both due to the expected revenues and due to the proof of feasibility for the company’s business model, in which a significant factor invests in financing the project for the sake of a partnership with the company.
On the next page we present the main events in Q3 2022.
Lead Analyst
Dr. Tiran Rothman
Equity.Research@frost.com
Tel.: +972-9-9502888
NRGENE TECHNOLOGIES LTD
11.12.2022
Key events in Q3 2022 and as of the publication of this report:
R E S E A R C H & C O N S U L T I N G L T D.
Investment Thesis
Agriculture is one of the oldest areas of technology and innovation in existence. Its objectives have changed little throughout history: finding ways to increase yields and maximize key traits of crops or animals, such as size, flavor, color, and resistance to pests. Agtech startups have provided farmers with a variety of strategies and technologies to help improve crop resiliency and output. These include agri-finance tools, biotech solutions to improve yields and resiliency, farm management software, and an emerging focus on data-driven artificial intelligence and machine learning (ML) to help automate decision-making.
Modern Agtech startups began attracting venture funding roughly a decade ago, with the industry raising USD
322.2 million in 2010. Since then, VC funding in Agtech has grown to USD 6.1 billion in 2020, a 33.8% CAGR. This explosive growth is a direct result of two primary factors: population growth and climate change. The global population is expected to swell to 9.8 billion people by 2050, driving more demand for food.i At the same time, greenhouse gases and warming climates are creating increasingly frequent extreme weather events that threaten crop yields.
NRGene Technologies Ltd. is an AgTech company engaged in research and development of technology in the field of AI, including software tools, with the aim of analyzing genetic information based on Big Data, in order to accelerate and improve the natural development of crops and animals in the global agriculture and food industry. The uniqueness of this technology lies in its ability to analyse all gene combinations, locate the optimal genetic composition and enable the natural improvement of plant or animal traits by creating new varieties in an accelerated way.
NRGene’s technology is widely used to create disease-resistant and climate-resilient varieties with healthier nutritional compositions and maximized yield potential. In the field of plant genomics, the company offers a vast proprietary database and AI-based technologies. The solutions provided by the company have been widely accepted by several research organizations and big industrial players across ~300 projects.
The core of NRGene’s technology is its cloud-based AI tool coupled with its extensive database of genomic information, field performance data, and information on pests, diseases, and seed and irrigation
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R E S E A R C H & C O N S U L T I N G L T D.
considerations. This information is fed into NRGene’s AI model, which computationally predicts elite varieties that consider the mentioned variables. Once the predicted variety is identified, then the variety is produced either using an expedited breeding process, gene editing, or CRISPR. This process allows improved varieties to develop in half the time and at half the research and development costs.
NRGene’s solution can be applied and utilized early in an R&D cycle to identify interesting or problematic genes. The Company intends to continue and expand its seed and traits royalty business to solve specific challenges directly to farms and to breeding organizations (seed, food & beverage, processors, retailers, etc.), including offering disease-resistant,drought-resistant, and pest-resistant varieties.
The Company has a comprehensive R&D team that offers innovative solutions in the field of genomics. These capabilities have been combined and have allowed the Company to easily identify several proprietary traits across a wide set of plant genomes that it can license in the future.
NRGene’s long-termgo-to-market strategy is to become a one-stop shop for all plant and animal breeding genomic requirements. We deem that NRGene is in a strong position for growth due to its large customer base, scalability potential, know-how, and agile business model.
Market
The following three areas encompass significant portions of NRGene’s addressable market: bioinformatics technologies, genotyping, and seeds (both genetically modified (GM) and non-GM).
The bioinformatics technology market for agricultural applications generated revenue of USD 3,296 million in 2020 and is expected to generate USD 7,509 million in 2026, a CAGR of 14.7% between 2021-2026. Due to the pressing need to use bioinformatics to identify and cultivate unique traits and the number of unaddressed opportunities across the world, it is expected that the demand for bioinformatic technologies will be immense. In general, Frost & Sullivan expects that revenue growth will range from 13% to 25%, depending on the target application.
A key growth opportunity in the bioinformatics sector is addressing the need for integrated solutions and systems. NRGene’s solution could help seeds and/or food firms compensate for the lack of skilled personnel that is hampering market growth and facilitate their transition into integrated solutions and systems companies.
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R E S E A R C H & C O N S U L T I N G L T D.
The seed market generated revenue of USD 42,424 million in 2020 and is expected to generate USD 54,926 million in 2026, a CAGR of 4.4% between 2021-2026. The non-GM seed market will also grow during the forecast period as farmers, consumers, governments, and other relevant stakeholders slowly move away from GM-produced varieties. Non-GM crop demand is rising in Asia and the EU and, consequently, these crops command a premium over GM varieties despite possible lower yields.
NRGene could help GM/non-GM companies boost their R&D efforts and quickly achieve varieties with desirable traits such as increasing resistance to pests and tolerance to herbicides, and adverse weather such as drought.
The genotyping technology market generated revenue of USD 1,855 million in 2020 and is expected to generate USD 3,087 million by 2026, a CAGR of 8.9% between 2021-2026. With the increasing adoption of technologies in the plant and animal genomics market post-COVID-19 pandemic, and the 2022 Russian invasion of Ukraine, the market size of support services is expected to grow in parallel by 2026 to facilitate the adoption of services amongst researchers and industry giants.
Valuation summary
NRGene is a growth firm, thus we based our valuation on current and future market trends and the Company’s plans for future operations. Due to the high growth in the Ag Biotech market and the uniqueness of NRGene’s solution, we predict that the Company is well-positioned to generate significant growth in the foreseeable future.
We conducted NRGene’s valuation using market benchmarks from recent deals and analysis of VC’s activity; Given the assessments and findings mentioned above, we value the company’s stock price target in the range of NIS 29.4 to NIS 32.4, with a mean of NIS 30.9.
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Nrgene Technologies Ltd. published this content on 11 December 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 11 December 2022 18:12:02 UTC.