How Laser Photonics Corp (NASDAQ: LASE) is Using Advanced Technology to Revolutionize the Abrasive Cleaning Market
Abrasive blasting, the most common example of which is sandblasting, has served as the standard industrial-grade solution for the cleaning of surfaces for decades. Diverse industries from manufacturing to defense to automotive and aerospace rely on sand blasting for rust removal, surface smoothing, and general upkeep of heavy machinery and metal parts. The US Navy alone allocates some $3B/annum to marine rust removal, indicating the massive total addressable market that includes major both private and public sector actors.
The abrasive blasting market overall is valued at $46B per annum, and yet the industry largely relies on legacy methods that have been subject to increased regulatory and health scrutiny in recent years. Since the first patent for an abrasive blasting process was issued in 1870, the fundamental technology behind the industry has changed little.
A glance at the National Institute for Occupational Safety and Health’s (NIOSH) page on hazards associated with abrasive blasting drives this point home. Legacy abrasive blasting techniques are responsible for a host of health issues, from silicosis to carbon monoxide poisoning, that have resulted in scores of deaths and workplace injuries over recent years. In consequence, class action lawsuits have mushroomed, with payouts reaching into the tens-of-millions awarded to claimants injured using sand blasting techniques for industrial surface cleaning.
This host of occupational hazards associated with traditional abrasive blasting techniques has spurred the development of novel methods using photonic technology, a shift that is fundamentally disrupting a reliable industrial market segment defined by inelastic demand and robust forecast growth. Laser blasting is a cleaner, safer, and more scalable approach to rust removal and surface cleaning that has only recently begun to penetrate the abrasive blasting industry, yet with highly encouraging initial results. No company’s experience illustrates this disruptive trend better than Laser Photonics Corp, which is based in Orlando FL and recently completed a NASDAQ listing in Q4 2022.
According to Laser Photonics, the company has pioneered, “a new generation of disruptive laser blasting technologies aimed at emerging and traditional markets, including corrosion control, rust removal, de-coating, welding, laser cleaning, and surface conditioning, while reducing environment hazards and increasing workplace safety.” Independent analyst research confirms that Laser Photonics is the only significant player in the field of laser blasting currently operating in the US. In the same way that laser technology is fundamentally changing diverse fields from medical technology to space tech and self-driving vehicles, Laser Photonics holds a tremendous first-movers advantage in their application of this solution to abrasive blasting.
Due to this first-movers advantage, Laser Photonics claim that it is tapping a unique market opportunity couldn’t be truer. Between the $22B budget for annual corrosion control allocated by the US military to the nearly $15B spent annually by the oil and gas industry, the total addressable market for LASE’s technology is massive and wide-ranging. Furthermore, “stickiness” of blue-chip clients like the Pentagon, Ford, and 3M add a modicum of stability to Laser Photonics existing contracts that is a rarity for early-stage public companies.
Financially, Laser Photonics wager on the undermet need for laser blasting solutions has already begun to pay off. With positive operating and profit margins, nearly $5M in revenue TTM for end-Q3, EBITDA of $1.22M, and an estimated EPS of $0.20 for ’23, Laser Photonics has an unequivocally profitable bottom line, which is a rarity for smallcap companies let alone fresh capital market listees. Their trajectory on NASDAQ likewise looks encouraging, with triple-digit growth in share price since a start-Q4 listing and a recently announced 2M share buy back program by management. From an investment perspective, laser blasting certainly pays, and LASE is doing it best.
In sum, Laser Photonics is embodying that rare combination of the right tech in the right place at the right time that has the potential to transform them into a blue chip giant. Though their current market cap of ±$50M pales into comparison to better-established developers of laser technologies like IPG Photonics or Luminar, the momentum currently propelling Laser Photonics forward is impressive. Given the likelihood of increasingly restrictive regulations being placed on sand blasting and other legacy abrasive blasting techniques, LASE’s TAM only stands to grow with time. If management can keep a cool head and continue driving innovation within its already diverse product line, Laser Photonics stands to corner a nascent though enormously profitable industrial market segment.
