Small Caps | Oct 02 2025
This story features EROAD LIMITED.
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The company is included in ALL-TECH
New research points to upside from connected and autonomous vehicles for Eroad's transport technology business, especially from new regulations in New Zealand.
-Eroad a beneficiary of connected and autonomous vehicles
-Potential regulatory win via New Zealand incumbency
-Move to profitability and FCF positivity in FY25
-Inaugural Moelis research highlights multiple growth options
By Mark Woodruff
Since reporting FY25 results in May, shares in New Zealand-based transport technology business Eroad ((ERD)) have staged a strong rally on the ASX, with the share price climbing from around 80c to $2.29 at yesterday’s close, having peaked at $2.60 earlier in September.
The company’s evolution to a broader vehicle fleet operations platform from a pure telematics provider is being aided by the significant growth opportunity from new road use-based excise charges. There is also potential upside from autonomous vehicles in the longer-term.
In this context, telematics refers to onboard hardware such as GPS, sensors, and diagnostics units that capture and transmit data via wireless networks.
Eroad’s hardware-enabled SaaS platform allows commercial and government fleets to monitor emissions, improve safety, and comply with increasingly complex regulations.
Gathered data can relate to vehicle location, routes, utilisation, driver behaviour, fuel consumption, engine performance and compliance requirements including road user charges (RUC), hours of service, and tax reporting.
Pioneering the world’s first nationwide GPS-based electronic road user charging (eRUC) system in New Zealand, Eroad remains the market leader in such compliance.
The company’s connected platform helps manage vehicles, assets, and drivers with real-time visibility and control, serving highly regulated industries such as freight, construction, and food transport across New Zealand, Australia, and North America.
Services are integrated into customers’ core fleet operations. Moelis, in new research coverage released just last week, believes these services present multiple growth opportunities.
In recent years the company has pivoted from rapid expansion to a “growth with discipline” strategy, focusing on core markets, enterprise customers, and product innovation while improving profitability.
Moelis explains management has also refined its strategy to align with shifting industry dynamics, driven by the transition to electrification and the advent of connected vehicles.
The growing adoption of connected, and eventually autonomous, vehicles is generating vast amounts of data, explains the analyst, which telematics solutions can capture and analyse.
Potential regulatory bonus
Regulatory developments in Eroad’s home market are set to unlock significant long-term upside, with the company already processing 90% of New Zealand’s heavy vehicle eRUC kilometres.
In early-August, the New Zealand government announced a landmark policy to transition all vehicles (not just heavy trucks) to electronic Road User Charges by 2027, phasing out fuel taxes. This upcoming reform will add an estimated 3.5m additional vehicles into the eRUC system and will likely be passed within the next 12 months, Shaw and Partners suggests, given existing bipartisan support.
Eroad’s core business is centred on both heavy vehicles and trucking fleets, but many clients also manage light commercial fleets, hence, Moelis sees a sizeable growth opportunity with the introduction of new road-use excise charges.
Shaw also points out the New Zealand government is highly motivated to ensure strong compliance, as road user charges generate more than NZ$1.5bn annually, making even small revenue leakages significant.
Canaccord Genuity explains the eRUC system will replace the long-standing fuel excise duty on petrol (currently around NZ70c per litre), reflecting the rapid growth of electric and hybrid vehicles, as well as the widening gap between road infrastructure costs and declining fuel excise revenue.
Eroad holds around 92% market share of electronic road user charges in New Zealand and is Canaccord Genuity considers it well positioned to benefit from first-mover advantage, incumbency, and integration with key public and private stakeholders.
Including the conversion of 800,000 vehicles on paper-based RUC and 3.5m passenger vehicles, the addressable market would increase by 4.3m vehicles should Eroad win the contract.
Anticipating a model similar to Australia’s eTag system, with an upfront hardware charge and recurring top-up or connection fees, the broker forecasts between $3-5 per vehicle per month, which could generate more than $150m in revenue for Eroad, delivered at elevated gross profit margins.
New products
Shaw highlights Eroad has demonstrated an ability to deliver relevant new products on a modern release cycle.
New products have included the Clarity Edge AI Dashcam (September 2024), Cold Chain Assurance Solution (August 2025), and Concrete Workflows, a suite of digital tools tailored for ready-mix concrete operations.
Past performance and contract wins
In FY24, the company achieved positive free cash flow of NZ$1.3m, a major improvement from the -NZ$29.9m cash outflow in FY23.
Adding thousands of subscriptions, but more importantly validating Eroad’s value proposition for large fleet operators, the company secured its largest-ever Australasian customer contract in June last year. A three-year deal was struck to deploy at least 5,000 units in a client’s Australian fleet and to renew 6,000 units in its New Zealand fleet.
In October 2024, Eroad teamed up with global telematics leader Geotab to introduce “Eroad Locate,” a simple and affordable tracking solution for light commercial vehicle fleets in A&NZ. This partnership integrates Geotab’s low-cost hardware with Eroad’s platform, allowing Eroad to tap into a largely underserved small-fleet segment which had previously been priced out of telematics.
Management also forged strategic partnerships in mid-2025 with maintenance software providers Fleetpal and Whip Around to offer integrated fleet maintenance and compliance solutions.
These collaborations combine Eroad’s real-time vehicle data with maintenance workflows, enabling fleet customers to automate inspections, schedule repairs by odometer triggers, reduce downtime, and ensure regulatory compliance via a single interface.
FY25 results
Eroad’s FY25 result (March year-end) showed revenue climbed by 6.8% year-on-year to NZ$194.4m and free cash flow (FCF) surged to NZ$16m. The business posted a net profit of NZ$1.4m for the period versus a -NZ$0.8m loss in the prior financial year.
Jarden identified the move to profitability as the key highlight.
This analyst explained revenue growth was supported by price increases and deeper penetration within existing customers, which offset churn in North America and softer new wins in a difficult macro environment.
North American units declined -2% as the company prioritised higher-value enterprise accounts and scaled back sales efforts in the smaller, more price-sensitive segment.
After embedding changes to the cost base and operating model, management delivered the first FCF positive result since FY21, and the second since listing in August 2014.
Jarden notes cash flow dynamics are improving through a shift, underway in 1H25, to a “build-to-contract” model that secures upfront payments at signing for large deals.
Around 17% of total revenue is now billed on an annualised basis.
Management has framed FY26 as another year of profitable growth with further improvement in free cash flow, driven by contract expansion, new wins, pricing discipline, and ongoing cost control.
Outlook
Yesterday, Shaw and Partners raised its price target to $3.20 from $2.70 on increased confidence around the eRUC opportunity.
Key investor concerns include the potential for mobile phones being used as a substitute, the (in)ability to deliver a device for light vehicles, and potential delays, notes the broker.
Shaw begs to differ, citing New Zealand’s strong compliance culture, government reliance on RUC revenues, and impracticality of phone-only solutions as limiting substitution risk.
The only daily monitored broker by FNArena that actively covers Eroad, Shaw maintains its Buy, High Risk rating (new target $3.20).
Outside of daily coverage, Moelis and Canaccord Genuity have Buy ratings with respective targets of $3.00 and NZ$3.00.
Neutral-rated Jarden has a target of NZ$1.20, raised from NZ$1.05 after the broker assessed FY25 results in May.
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