Needham analyst Michael Lew believes that lithium battery separator producer Polypore (PPO) is positioned to "usher in a new era of transportation," owing to its technical advantage. In an equity report, Lew says the company's Celgard division, which makes this separator material, sets itself apart from competitors by using a lower-cost "dry stretch" manufacturing process; competitors are using a "wet process" technology. Its "breath" of product offerings -- monolayer and trilayer configurations -- also gives it an edge. Demand for Celgard's products are "accelerating" with the launch of various electric vehicle programs and scheduled rollouts, which Polypore is getting ready for, according to Lew.
Polypore recently announced a $32 million lithium separator production expansion project to meet the expected rev up in electric vehicle demand, adding to a number of its other expansion projects around the world. "This is not a 'build it and they will come' strategy, in our view, as management noted definitive 'line of sight' into demand linked to specific customer vehicle programs," BB&T analyst Kevin Maczka said in a note. The analyst sees sustained plus 20% growth potential in the company's lithium business -- Polypore's highest margin unit -- in the coming years.
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