We roll our valuation framework on AESI to 2026 to capture a full year of Dune Express. Our $18 target price reflects a sum-of-the parts valuation. We apply a ~3.0x multiple to AESI’s product business EBITDA, a ~9.0x multiple to its logistics business EBITDA and  a ~7.0x multiple to its power business EBITDA. We believe the multiples to be fair given forecast FCF.

The principal risk for AESI is commodity demand/price risk. Lower demand and prices for oil and gas can, in turn, drive US frac/frac sand demand and pricing meaningfully lower, directly impacting the realized prices of AESI’s core product. Alternatively, an oversupplied Permian frac sand market would also have the effect of driving realized pricing lower. For AESI’s logistics business, more specifically, the primary risk is that its central project, the Dune Express, does not get completed.

If the impact on the company from any of these factors proves to be greater than we anticipate, the stock will likely have difficulty achieving our target price.