Electrovaya Stock Appears Attractive Based on its Scalable, Superior Technology

Electrovaya Inc.’s (TSX: EFL) lithium-ion batteries are considered superior to its competitors and its patented technology is scalable

SmallCapPower | August 29, 2017: Electrovaya Inc. (TSX: EFL) designs, develops and manufactures proprietary Lithium Ion Super Polymer batteries, battery systems, and battery-related products for energy storage, clean electric transportation and other specialized applications. Electrovaya, through its fully-owned subsidiary Litarion GmbH, also produces cells, electrodes and SEPARION ceramic separators and has manufacturing capacity of about 500MWh/annum. Electrovaya is a technology-focused company with extensive IP, headquartered in Ontario, Canada; the Company has production facilities in Canada and Germany with customers throughout the globe. Electrovaya stock has corrected ~45% on YTD basis, presenting a good opportunity for those who want exposure to the lithium space.

Investment Thesis

  • Rising demand for Lithium Ion batteries
  • Electrovaya has superior batteries than global competitors
  • EFL’s patented technology is scalable to multiple markets

Rising demand for Lithium Ion batteries  

The global market for Lithium-Ion batteries is expected to hit $46.21 billion by 2022, registering a CAGR of 10.8% during the period 2016-2022, according to a report published by Allied Market Research. Citi Research projects the global lithium battery market to be $40 billion by 2020. Lithium-ion batteries are rechargeable batteries that can be used as a source of power supply primarily in portable devices. The rising demand for electric vehicles and growing environmental concerns would add up to notable growth in this sector. Other key factors that drive the growth of this market is the growing penetration of smartphones, tablets, and other electronic devices. Lithium-Ion batteries provide a cost-effective substitute for fossil fuels such as gasoline and are being favoured by governments worldwide and organizations due to cost reduction benefits they provide.

Superior batteries than global competitors

Electrovaya claims superiority of its batteries mainly on the safety concerns, which are a priority in this industry. Electrovaya uses a unique third generation ceramic separator called SEPARION to ensure their batteries are reliable and safe. The Company owns extensive patents on this technology. Separion provides increased safety in short circuit events; heat stability prevents battery failures. Additionally, the lifecycle of Electrovaya batteries is 50-100% higher than its competitors.  

EFL’s patented technology is scalable to multiple markets

Electrovaya’s proprietary technology can be used in large global high-intensity battery usage markets. The Company has a diverse battery portfolio serving industries ranging from commercial vehicles to grid scale storage systems. They serve the industrial vehicles (forklifts), commercial vehicles (E-Bus and delivery trucks) and residential, commercial energy storages. It’s estimated that sales of lead acid forklift batteries are >250,000 in the U.S. and >460,000 in the EU with global replacement battery market at ~$1.5 billion in North America. Electrovaya plans to address ~60% of market by Q4’17.

Demand for mobile storage systems is rising as they can be quickly deployed to emergency sites, are highly reliable and provide high-quality power. Lithium-Ion batteries would replace emergency-use diesel gensets, which are high maintenance. There’s also a surging demand for safe and good life cycle batteries in electric buses and delivery vans that Electrovaya can capitalize upon.

Financial Performance

Q3’17 revenues came in 72% higher at $4.4 million compared to Q3’16 revenue of $2.6 million. Sequentially, revenues surged 120% from $2.0 million in Q2’17. OPEX as % of revenues decreased to 100% from 125% in the year-ago quarter. The net loss for Q3’17 was $6.3 million compared to a net loss for Q3’16 of $3.1 million.

Outlook

The Lithium-Ion battery market looks lucrative from a long-term perspective. Lithium is a potential alternative source of energy for the future. Given the high barriers to entry, surging demand for lithium batteries worldwide and EFL’s proprietary technology, we are optimistic about the Company’s prospects. Its stock price has corrected ~45% on YTD basis, presenting a good opportunity for those who want exposure in the lithium space.

Disclosure: Neither the author nor any of the principals at Small Cap Power, or their family members, own shares in any of the companies mentioned above.

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