Altech Batteries Ltd (ASX:ATC) has a lucrative opportunity to meet the surge in demand for grid battery storage, as well as the EV lithium-ion battery market, through its innovative and disruptive technology, according to Arrowhead Business and Investment Decisions.
Arrowhead has reinitiated its coverage on Altech with a fair value of A$0.33 per share in the low-bracket scenario and A$0.74 per share in the high-bracket scenario, derived using an NPV (net present value) methodology.
The following are extracts from Arrowhead’s due diligence and valuation report on Altech:
Burgeoning large addressable market may provide significant tailwinds going forward
Altech’s flagship CERENERGY® battery project is specifically designed to cater to the needs of the grid (stationary) energy storage market. The grid energy storage market is projected to achieve a 28.0% CAGR in the coming decades. The global grid energy storage market, last year valued at USD 4.4 bn, is expected to reach c. USD 15.1 bn by 2027.
Altech’s Silumina Anodes product incorporates high-purity alumina coated silicon and graphite into the anode of Liion batteries, which are a significant component of EVs, and are expected to dominate demand in the future, with lithium-ion (Li-ion) battery capacity expected to grow at a CAGR of 26.0% over 2020-25. By incorporating silicon into the anode, Altech is achieving a 30% higher energy capacity than traditional graphite only anodes.
The strategic projects operated by the Company intend to cater to the insatiable demand from end-users, and demonstrates a massive opportunity for the Company to move forward.
JV with a partner of sound repute, presenting substantial innovation opportunities
Fraunhofer-Gesellschaft, the world’s leading applied research organization, is playing a major role in the innovation process by prioritizing key future-relevant technologies and then commercializing its findings in business and industry. Fraunhofer is German government owned, and currently operates 76 institutes throughout Germany, of which Fraunhofer Institute for Ceramic Technologies and Systems (Fraunhofer IKTS) conducts applied research on high performance ceramics. The development of CERENERGY® technology testifies to the competencies of Fraunhofer, which revolutionized previous technology. The CERENERGY® battery technology uses common table salt and ceramic solid state technology. This allows much lower production costs, which are estimated by Fraunhofer to be c. 40-50% cheaper than lithium-ion battery costs. The aim of the JV is to commercialize the 100 MWh (Train 1) production facility at the Schwarze Pumpe Industrial Park in Saxony, Germany, on land owned by Altech. In the process, Fraunhofer has already tested the world’s largest CERENERGY® type batteries in terms of capacity in stationary battery modules. Another of Fraunhofer's notable innovations is the MP3 digital audio coding format.
Investment thesis conclusion
The Company plans to strategically position itself to cater to the growing demand for grid storage through its CERENERGY® battery project developed in partnership with Fraunhofer. Altech’s innovative technology is addressing the challenges faced by the industry in putting silicon into the anode chemistry of lithium-ion batteries, thereby paving the way for significant growth opportunities in the segment. However, on its way to becoming a reliable and preferred specialized battery material technology and development Company in the market, it must overcome certain hurdles which might pose a threat to the Company, such as raising adequate funds for the project, stringent regulatory environment and effectively diversifying its supply-side risk.