Microfiber Regulation And ESG Laundry Demand Will Drive Long-Term Upside Potential

Catalysts

About Xeros Technology Group

Xeros Technology Group licenses proprietary, resource efficient laundry and garment finishing technologies that cut water, energy, chemicals and pollution for global manufacturers and brands.

What are the underlying business or industry changes driving this perspective?

• Scaling adoption of the Care technology through a signed product launch agreement with a top 10 global domestic washing machine OEM and three further OEMs in active pipeline should expand installed base rapidly from 2026. This supports multi year license revenue growth and increases visibility over future earnings.
• Intensifying environmental and consumer pressure on water, energy use and garment longevity in home and commercial laundry positions XOrbs enabled machines as a cost saving and ESG solution. This can support premium pricing by OEM partners while improving Xeros royalty yield and ultimately boosting gross margins.
• Legislative momentum in Europe, North America and other regions to mandate microfiber capture from laundry effluent creates a large, time bound addressable market for XFilter external and integrated solutions. This gives potential for step changes in unit volumes, recurring consumable sales and higher revenue growth rates.
• Commercialization progress in denim finishing with Yilmak and initial large customers such as Ambition Apparel, combined with live field data showing around 20 percent production cost savings and at least 30 percent CO2e reduction, should drive further machine rollouts and recurring XOrbs demand. This increases recurring revenue and improves earnings quality.
• Exposure to fast growing Asian manufacturing and appliance supply chains via Xinbao, Donlim and Weili, alongside blue chip European partners, diversifies geographic risk and gives leverage to global OEM volumes. This can spread fixed costs, expand royalty streams and support operating margin expansion over time.

Assumptions

How have these above catalysts been quantified?

• Analysts are assuming Xeros Technology Group's revenue will grow by 216.1% annually over the next 3 years.
• Analysts are not forecasting that Xeros Technology Group will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Xeros Technology Group's profit margin will increase from -2493.9% to the average GB Machinery industry of 8.1% in 3 years.
• If Xeros Technology Group's profit margin were to converge on the industry average, you could expect earnings to reach £377.3 thousand (and earnings per share of £0.0) by about December 2028, up from £-3.7 million today.
• In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 282.8x on those 2028 earnings, up from -4.1x today. This future PE is greater than the current PE for the GB Machinery industry at 24.2x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.6%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• The company remains structurally loss making for several more years as license and consumable revenues ramp more slowly than expected because OEM partners control product launch timing and market push. This would pressure earnings and heighten the risk of future dilutive capital raises, directly impacting net margins and cash flow.
• Adoption of Xeros enabled washing machines and denim finishing systems may fall short if consumers and factories prove highly price sensitive or indifferent to garment care and ESG claims. In that case OEMs may restrict the technology to niche premium SKUs rather than mass market lines, which would cap royalty volumes and limit revenue growth.
• Legislative moves on microfiber filtration could proceed more slowly, set weaker technical standards or favor competing technologies such as those from Matter and other filtration providers. This could reduce the urgency for OEMs and households to adopt XFilter solutions and constrain the long term addressable market, which would lower filtration related revenue and delay operating leverage.
• Reliance on a small number of large manufacturing and retail partners in concentrated global supply chains exposes Xeros to execution risk if any major OEM, retailer or licensee delays launches, reprioritizes R&D budgets, or switches to in house or rival solutions. This would create volatility in license fees and XOrbs orders and undermine earnings visibility.
• Operating in cost focused, commoditized industries such as domestic appliances and garment manufacturing may trigger ongoing price pressure and demands to share cost savings with OEMs and factory customers. This could compress the royalty rate and XOrbs margin over time and limit the improvement in gross margins even if unit volumes grow.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The analysts have a consensus price target of £0.16 for Xeros Technology Group based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• In order for you to agree with the analysts, you'd need to believe that by 2028, revenues will be £4.6 million, earnings will come to £377.3 thousand, and it would be trading on a PE ratio of 282.8x, assuming you use a discount rate of 8.6%.
  
• Given the current share price of £0.02, the analyst price target of £0.16 is 89.1% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.