As Tesla (TSLA) spends $5 Billion on a 'gigafactory' to cut battery costs 30% by 2017, Apple (AAPL) is rumored to be working on a cost-effective battery of its own - alongside, of course, Google (GOOG) who has long aspired to enter the automotive industry. The biggest barrier to entry into electric vehicles or ‘EV’ is the component cost of the battery, which has made Tesla prohibitively expensive for the mass-market consumer. The Company believes huge-scale production will drive down costs enough to introduce a vehicle at an affordable price point. If you own Tesla you're directly betting on the success of the gigafactory in driving down battery component cost.
This Burgeoning Company Just Emerged In the Next-Generation Battery Space
Another way to play innovation in this fast-growing multi-billion dollar battery industry is to own Integral Technologies (OTCQB: ITKG), who held a call on Monday to explain a new breakthrough with its lightweight material in potentially replacing lead-acid batteries - a $44 Billion and growing market – with a more cost-effective alternative.
Integral has a unique material called 'Electriplast' that is lightweight, resilient and non-corrosive, while electrically and thermally conductive. We've highlighted this name before as a leading alternative to heavier metallic components used in vehicle frames, as shown in Figure 1 below.
Figure 1: Applications for Electriplast in the Vehicle Frame
Replacing heavier metallic components with lighter materials that serve the same function is called 'lightweighting' and we believe ITKG is at the forefront of this $300 Billion trend. Now Integral is also contending to be a part of the supply chain for a next-generation battery. We believe this creates a unique and de-risked way for investors to gain exposure to this emerging trend. Consider that Electriplast has numerous applications across several industries, one of which is a more cost-effective alternative to lead-acid batteries. We view this as accretive to the future value of the Company and consequently beneficial to the present value of shares of Integral Technologies today.
How Integral Technologies Is Contending For the $44B Lead-Acid Battery Market
Integral Technologies says its Electriplast-based bipolar plate will cut steps and consequently time compared to manufacturing lead-acid batteries. As we reported in our initiation report, the advantage of bipolar relative to the existing lead acid batteries are:
i. More energy capacity (energy density)
ii. Increased cycle life
iii. Lighter weight
The lower weight (as shown in Figure 2, below) can be attributed to the exclusion of lead components such as grid and cell connectors that do not contribute to the delivery of current. Lead accounts for about 65% of battery weight.
Figure 2: A Potential Bipolar Battery Solution
Integral has already partnered with the largest single-site, lead-acid battery manufacturing facility in the world – East Penn. We view this as validation of Electriplast and a meaningful stepping stone to revenue-generation in the not-too-distant future.
In parallel, Integral is working with BASF, the world's largest chemicals company; Hanwha, one of the largest high-tech material suppliers; and Delphi Automotive, a large automotive parts manufacturer.
Betting On Integral Technologies’ Place in the Supply Chain
bet on ITKG is a bet that Electriplast will find a humble place in at least one burgeoning multi-billion dollar industry. For instance, regulators are already putting pressure on auto manufacturers to reduce emissions. The most practical and cost-effective way of achieving these mandates and avoiding costly penalties is to replace metals like steel with lighter materials like aluminum or, perhaps, Electriplast. As the cost of carbon fiber – a key raw material in Electriplast – declines, ITKG’s technology becomes increasingly competitive in numerous verticals.
If Tesla fails in reducing the cost of its EV battery meaningfully, its growth could be in jeopardy. If Electriplast fails to gain meaningful traction in any one vertical, ITKG still has numerous other industries where it could generate meaningful cash flows. We view this as a de-risking factor and consequently a de-risked way to bet on the future of battery technology.
Put another way, Integral’s future is in supplying a unique component to increasingly mass-market global supply chain(s), akin to Nuance (NASDAQ:NUAN) who supplies voice recognition technology to the world’s largest technology companies; BSQUARE (NASDAQ:BSQR) who develops the software that runs ‘connected systems’ like point-of-sale terminals, kiosks, gaming platforms, tablets etc.; or A10 Networks (NASDAQ:ATEN) who develops application software to run and secure large data centers and their networks. Notably, all three of these technology companies have quietly progressed towards diversifying revenues and their customer base, and have traded higher on this trend (Figure 3, below). Similarly, we expect ITKG to trade higher as it progresses towards becoming a meaningful input in one or more global supply chains.
Figure 3: Share Price Performance of ITKG, ATEN, BSQR, NUAN Year-to-Date
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Legal Disclaimer: This research note has been prepared by One Equity Research, LLC on behalf of a third party, as part of research coverage services. One Equity Research is compensated twenty thousand dollars per month and may receive additional compensation for ongoing coverage of Integral Technologies. This research note is not an offer or solicitation to buy or sell the securities of Integral Technologies. The note is for information purposes only, and is not intended to (and is provided explicitly on the condition that it not) be used as the sole basis to make any investment decision. Investors should make their own determinations whether an investment in any particular security is consistent with their investment objectives, risk tolerance, and financial situation.