Last week, Surna Inc. (OTCQB: SRNA), operating as Surna Cultivation Technologies, achieved another milestone with the expansion of its HVACD product portfolio.
The expansion is in response to several states requiring cultivation facilities to use variable refrigerant flow (VRF) technologies. With their expansion in the product line, Surna is continuing to build its position as a leading provider of technologies that satisfy all cultivation facility sizes, budgets and grow techniques.
We expect Surna to attract new customers who are looking for solutions that are specific to their needs. We consider this focused offering an extension of Surna’s flexible approach to achieving their customer’s requirements in the controlled environment agriculture (CEA) market.
VRF Improves the Value of Surna’s Product Portfolio to Clients
We are favorable on how Surna has incorporated VRF technology into its product line to meet the needs of its customers. Some of the benefits of VRF technology include:
- Multiple air handling options that allow for redundancy.
- Ductless application compatibility.
- Variety of types and sizes which provides a fit for most applications.
- VRF technology helps minimize waste, which in turn reduces total cost of ownership, as it is designed to supply the precise amount of refrigerant to each air handler that’s needed to cool the room.
- Can improve energy efficiency by capturing heat as part of the cooling process. The heat can be redirected and used in other locations of the building that require warmer temperatures.
A client could optimize their operation by combining Surna’s VRF system with a standalone dehumidifier (i.e., Surna’s Anden dehumidifiers) and we find this to be an attractive aspect of the story as the entire system is available from a single source.
Well Positioned to Record Strong Growth Over the Long-Term
During the last year, Surna has increased the amount as well as the type of products and services that are available for sale. Based on the company’s most recent earnings report, we are seeing increased interest in its proprietary and curated portfolio of products and services and are favorable on the trend. During the quarter, Surna reported strong revenue growth, and this is a trend that we expect to continue.
At current levels, we find Surna’s valuation to be compelling and believe it is trading at a discount when compared to its peers. Assuming the company will report the same amount of revenue in future quarters, its valuation will be less than 1x revenue (based on the current market capitalization).
From a liquidity and working capital standpoint, Surna is well positioned to capitalize on its order backlog. We believe their new products and services make the company’s holistic commercial offering stickier with clients and expect to see the average lifespan and revenue per client increase as a result.
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