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Next generation lithium battery - Li-Metal impresses with innovative technology and outstanding management!
Company: Li-Metal Corp.
WKN: A3DAAU
Next generation lithium battery - Li-Metal impresses with innovative technology and outstanding management!
Lithium-ion batteries are the technology that is being prioritized to create the "green revolution" in mobility. Accordingly, the electromobility sector is booming across the board, and the demand for electric vehicles such as those produced by the US company Tesla, for example, is skyrocketing, as is the demand for lithium-ion batteries. A trend that is unlikely to weaken in the coming years - on the contrary, we expect a real bull market for the entire electromobility sector in the coming years.
Therefore, we believe that now is the right time to invest in promising and still undervalued companies - we have placed our main focus on the next generation of lithium batteries, because only with more powerful and cheaper lithium batteries will electromobility become a Success for all mankind!
We have put out feelers for promising companies in this currently massively up-and-coming sector. Here we have attached great importance to the quality and the track record of the management.
We came across the company Li-Metal (A3DAAU) , which not only scores with the high insider participation of the management of approx. 30% of all outstanding shares and a small free float (a total of only approx. 28 million shares outstanding - of which another 7 million shares blocked in the long term), but also knows how to convince with its unique and innovative lithium anode technology for the next generation of more powerful and cheaper lithium batteries. According to the company, sales of 282 million US dollars and an operating profit of 126 million US dollars (EBITDA) should be achieved by 2025 - currently Li-Metal (A3DAAU) valued at just $303 million on the stock exchange.
Comparable companies are currently valued at the stock exchange with 20 times the Ebitda (partly on 2030 scenarios), which in the case of Li-Metal would mean a mathematical valuation of over 2 billion dollars and thus a price multiplication by more than 15 times!
Management can draw on a wealth of experience in the lithium industry. Because a large part of the management (including CO-Founder Tim Johnston) completed a gigantic spac deal on the New York Stock Exchange with Li-Cycle Holdings (US symbol LICY) in 2021 , thereby demonstrating know-how and expertise. Li-Cycle Holdings is currently valued at over $2 billion. The quality of the company was recently underlined by a USD 100 million investment by the Koch Group. So the leadership team should know what they're doing and how they're adding value to shareholders - with LI-Metal, management's potential next winning deal is just around the corner. Anthony Tse, the former CEO of lithium giant Galaxy Resources, is another heavyweight in the lithium industry on board - Galaxy Resources and Orocobre (NYSE:OROCOBRE) recently joined forces in a $4 billion merger to create a new lithium giant.
As already mentioned, in our opinion Li-Metal (A3DAAU) is still on the lower end of the valuation scale, with a market capitalization of $303 million the company is still far from a fair valuation in our opinion - see also comparison companies in of the peer group on the following pages (between 1.8 billion and 13.3 billion dollars).
According to the company itself, it expects a valuation (conservative valuation range in our opinion - see slide 16 - presentation - LINK) in the range of the companies Nano One Materials (WKN A14QDY) and Standard Lithium (WKN A2DJQP) . The two companies are currently valued at $348 million and $1.7 billion in the stock market, respectively. In our opinion, Li-Metal (A3DAAU) still has some catch-up potential in the coming weeks and months.
Li-Metal and the lithium battery generation of the future
Lithium anodes are a key cost driver in battery manufacturing Li-Metal (A3DAAU) is already working closely with developers of next-generation batteries to deliver novel, low-cost anodes that are expected to have energy densities compared to those commercially available today state-of-the-art lithium-ion batteries by 50 to 100%. And that means, for example, a longer range and/or smaller batteries are possible. In any case, the company has already started producing samples this year, which companies working on next-gen lithium batteries can use in their research. We therefore expect potential partnerships with automobile and/or battery manufacturers in the near future.
Importantly, the flexible Li-Metal technology makes it possible to tailor anode products to the unique needs of different battery technologies, allowing a broad cross-section of next-generation batteries to leverage Li-Metal's technologies. Conventional anodes are made of lithium foil. To maximize next-generation batteries, Li-Metal is working on low-cost anodes, with underlying technology patent pending.
In addition to the higher energy density, the anodes developed by Li-Metal also have a significantly higher specific energy, a criterion that results in a significantly longer range in electric cars. Finally, the anodes developed by Li-Metal are significantly thinner than the models currently in use, which helps to save raw materials.
An even more scalable one-machine process guarantees high-quality production and large quantities. This new type of anode is vastly superior to foil anodes in terms of energy density, less material is used and high-performance batteries are the result.
As Li-Metal (A3DAAU) adds on their homepage, there is a chance of a market volume of 275 GWh per year in the field of lithium metal batteries by 2030! A huge market that Li-Metal hopes to capture a piece of by commercializing novel, improved lithium metal and lithium anode manufacturing technologies that have the potential to dramatically reduce production costs of next-generation batteries. This, in turn, could help accelerate market acceptance of these new types of batteries.
In addition, the Company plans to produce lithium metal directly from lithium carbonate using a proprietary process. According to Li-Metal, this not only makes you less dependent on unreliable foreign sources - including the use of recycled material - but also eliminates many of the harmful emissions associated with traditional lithium metal production from lithium chloride! According to Li-Metal, this process has already been used successfully.
So the next 12 months could be extremely exciting and eventful for Li-Metal. The plan is to start up an anode production facility and expand the lithium-metal demonstration plant. The anode development team is also to be expanded. The company has currently registered four process patents. Approval is currently pending.
We firmly believe that a battery or car manufacturer will soon become aware of Li-Metal's technology - various battery developers are already testing samples, so there may well be one or two significant company announcements in the near future.
Li-Metal expects sales to exceed $1 billion by 2028
According to the company, sales at Li-Metal (A3DAAU) should really take off from 2023. By 2025 it should already be 282 million US dollars in sales . Operating profit is expected to reach $126 million, according to a Li-Metal presentation. The plan envisages that Li-Metal could bring in around 1.375 billion in sales and a good 800 million US dollars in operating profit (Ebitda) in 2028. These numbers compared to the current market value of around $303 million mean a very moderate valuation.
Other companies that Li-Metal could compare itself to are listed on the exchanges at 20 times Ebitda. Based on the Ebitda expected for 2025, this would require a multiplication of the stock market value. Currently, Li-Metal is mathematically valued at just 2.5x 2025 Ebidta ($303mn), do the math for yourself what that could mean for tremendous upside potential.
Still favorably valued compared to the peer group
According to the company, almost all companies in the peer group that are committed to the next generation of batteries are valued at more than $1 billion on the stock exchange.
Interestingly, a company is said to be using a roughly comparable anode technology called SES , which has been admitted by resource legend and billionaire Robert Friedland and his SPAC Ivanhoe Capital Acquisition Corp. backed, and also boasting contacts and relationships with some of the big names in the industry, to go public via a SPAC deal announced in July - already valued at $3.6 billion! We believe that Li-Metal's plans could attract the attention of a wide range of investors and play a significant role in the current environment. However, it is a technology/cleantech company in an early stage of development, so the risks are also high . In our opinion, Li-Metal (A3DAAU) has nothing to hide with its technology and, in our opinion, is still extremely moderately valued at 303 million dollars compared to the peer group!
The entire sector is in an absolute gold rush mood, the companies can currently exaggeratedly hardly save themselves from financing offers from banks or institutional investors. This list impressively shows the gigantic potential of the battery technology trend market. The company Quantum Scape (partner of Volkswagen) even has a market capitalization of over 10 billion dollars.
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Recent acquisitions in the lithium sector
The fact that lithium projects are being looked for worldwide has now been shown by two takeovers in the industry. The mega deal of the Chinese Zijin Mining Group, which will take over the Canadian Neo Lithium (WKN A2AP37), attracted particular attention. Zijin Mining will shell out a good 919 million Canadian dollars in cash for this. Neo Lithium's Q3 project is located in Argentina, in the oldest and largest lithium producing province (Catamarca).
CATL and Lithium Americas (WKN A2H65X) are currently even bidding for the lithium company Millennial Lithium (WKN A2AMUE). As you can see, the industry is currently offering excellent opportunities and some rapid price increases that investors have been able to take advantage of.
Why lithium
The e-mobility supply chain is struggling for lithium. Higher investments in lithium production are therefore necessary. Should there be a serious shortage of lithium, the production of new electric vehicles would be limited by a lack of the raw material lithium. In principle, the lithium-ion batteries used in electric vehicles can use both lithium carbonate and lithium hydroxide. The price of lithium carbonate in China has already risen by around 170 percent, the highest since April 2018. Investors should therefore not forget the topic of lithium. Looking at China, for example, lithium carbonate output increased by around 19 percent in August compared to the same month last year. However, demand increased to a good 26 percent.
A deficit is approaching or already exists. And the demand for electric vehicles in China is great. From January to July 2021, around 150 percent more electric vehicles were registered than in the same period last year. And the entire market is dependent on batteries. While around 82,000 tons of lithium were mined worldwide last year, this was a sizeable market in the year of the pandemic. As lithium demand continues to grow, higher lithium prices are inevitable. Although there is basically enough lithium on earth, it has to be mined and found its way into batteries. Here, the demands in terms of performance are increasing, which explains how important the anodes made of Li-Metal (A3DAAU) are.
market prospects
Now it is crucial to actually get these potentially extremely promising technologies onto the market. Since the company assumes that a variant of the next generation of batteries, the so-called solid-state battery, will be increasingly used by major manufacturers such as Volkswagen, General Motors, Ford and BMW from around the middle of this decade, the aim is to be ready by 2025 Initiate commercial scale production of lithium metal.
This means that it is now - parallel to the production of samples and further work with potential customers and developers - to gradually expand capacities. As the next step, Li-Metal sees the construction and commissioning of a demonstration plant for lithium metal production in 2024, which is then to be supplemented by a commercial production plant from 2025. At the same time, work is being done on commissioning a plant for the production of the new type of anodes. And the company has big plans - by 2028 the plant should already have a capacity of more than 50 GWh per year. That, according to Li-Metal, would be enough to produce material for about 500,000 mobility scooters a year! It would be a worthwhile deal, as the company expects an EBITDA margin of around 50% for lithium anodes in the long term and another 10% EBITDA margin for lithium metal production.
Electromobility with gigantic growth prospects
Automobile manufacturers rely heavily on electromobility. For example, Ford is planning four new plants in the USA. Together with the partner SK Innovation, eleven billion US dollars will flow into the planned plants. According to forecasts, around 40 to 50 percent of the vehicles on American roads will be electric. General Motors is among the many major automakers transitioning to electric vehicles. A billion US dollars are to be invested in the production of electric cars in Mexico. Toyota plans to spend nearly $14 billion developing batteries for electric cars by 2030. And VW wants to use around 80 billion US dollars, also by 2030, for the development of autonomous driving and electromobility.
And car manufacturers are also finding more and more customers for their electric vehicles. Most e-vehicles are bought in China, but sales are also increasing rapidly in Europe. The second quarter brought a sales increase of 234 percent. In Germany alone, 17.1 percent of the vehicles sold in September 2021 were battery-powered. The variety of models is also increasing, with 500 models expected for next year. State subsidies ensure more sales. And the achievement of climate goals also favors the purchase of electric cars, and not just temporarily.
Conclusion:
As already explained in detail, it is often advisable to follow an experienced and successful management on the capital market, which has already been able to bag important deals in the past. In our opinion, Li-Metal is well positioned to play an important role in the absolute future and growth market of next-generation lithium batteries, which is currently in the public eye like hardly any other sector. We believe that Li-Metal's plans could attract the attention of a wide range of investors.
As already mentioned, Li-Metal (A3DAAU) is still at the lower end of the valuation scale in our opinion, with a market capitalization of $303 million, we believe the company is still far from a fair valuation - see also comparison of companies in the peer group (between $1.8 billion and $13.3 billion).
According to the company itself, it expects a valuation (conservative valuation range in our opinion - see slide 16 - presentation - LINK ) in the range of the companies Nano One Materials (WKN A14QDY) and Standard Lithium (WKN A2DJQP) . The two companies are currently valued at $348 million and $1.7 billion in the stock market, respectively. In our opinion, LI-Metal (A3DAAU) still has some catching up potential in the coming weeks and months.
To date, more than 1,000 meters of anode material have been delivered to customers and development partners. Li-Metal aims to begin lithium metal production in 2023 at a demonstration plant and at commercial scale in 2025, consistent with accelerated adoption of solid state batteries by major OEMs.
We firmly believe that a battery or car manufacturer will soon become aware of Li-Metal's technology - various battery developers are already testing samples, so there may well be one or two significant company announcements in the near future.
For more information
Presentation - LINK
Homepage - LINK
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