Amprius Technologies: Strong Buy As Company Secures Major Contract With Fortune 500 Company

seekingalpha10-18

Over $20 million secured in contracts to supply high-performance battery cells for light electric vehicles, expected to be fulfilled by mid-2025.Institutional interest is rising sharply, with a 228% ...

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the amount of energy you can store per unit of mass. Lithium-ion batteries are not capable of sustaining perpetual flight due to low energy density. Additionally, it takes too long to charge them. Back then , in the comments of that thesis, I mentioned several early-stage developments of silicon anode technology that could make perpetual flight possible due to higher gravimetric energy density and faster charging times. Littl","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"BK4096":"电气部件与设备","AMPX":"Amprius Technologies Operating Inc"},"translate_title":"Amprius Technologies：公司与财富500强公司签订重大合同，强力买入","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"AMPX":0.9},"content_text":"Over $20 million secured in contracts to supply high-performance battery cells for light electric vehicles, expected to be fulfilled by mid-2025.Institutional interest is rising sharply, with a 228% increase in new positions in Q2 2024.The company has no long-term debt, with solid cash reserves to support the ongoing growth and development of the Colorado site.Low valuation ratios, strong growth prospects with key contracts in place, and increasing demand in the aerospace market lead to my Strong Buy rating.Share your thoughts about this speculative opportunity in the comment section and discuss ideas with other investors. Let me know why I may be wrong.da-kuk Amprius Technologies, Inc. (NYSE:AMPX) is just a few weeks from publishing Q3 2024 earnings results. Considering the recent announcements of key contracts and agreements with Fortune 500 companies, and low valuation ratios due to the significant share price decline since the company went public, I believe there is a compelling buying case for this company. Indeed, there are several risks and challenges to consider, including negative gross margins, possible delays with the Colorado facility development, and a long timeframe to realize revenues. However, the recent high interest in the company from institutional investors, and the high volume (accompanied by a 50% increase in the share price) following the NYSE compliance warning are encouraging signs, in my view. In the outlook section, I will provide the rationale behind my Strong Buy rating, including a deep dive into the fundamentals of the company, a review of the recent insider activity, and a valuation overview. For now, I would like to start with a brief company overview section for those readers new to this stock. A brief anecdote I promise this is related to the thesis, despite the tangent. I am a former aeronautical engineer, currently working as a consultant for the biggest European aircraft manufacturer. Back in 2018, I wrote a thesis about the preliminary design of a high altitude pseudo satellite. In other words, a perpetual flight aircraft that uses solar energy to propel itself and charge its batteries during the day, powering itself during the night using the energy stored in the batteries. Airbus My model considered several factors in the preliminary design, including aerodynamics, material density, solar cell efficiency, and the energy density of the batteries on board. Guess what was the limiting factor for perpetual flight? Exactly! The batteries, specifically, the gravimetric energy density; the amount of energy you can store per unit of mass. Lithium-ion batteries are not capable of sustaining perpetual flight due to low energy density. Additionally, it takes too long to charge them. Back then (2018), in the comments of that thesis, I mentioned several early-stage developments of silicon anode technology that could make perpetual flight possible due to higher gravimetric energy density and faster charging times. Little did I know back then that years later, I would be writing a bull thesis related to this subject. Life, right? Company Overview As hinted above, Amprius Technologies develops and manufactures high-performance lithium-ion batteries using their proprietary silicon anode technology. These batteries have superior energy and power density, along with fast-charging capabilities, compared to conventional graphite-based lithium-ion batteries. Therefore, they can be used in aviation, electric vehicles, and emerging mobility solutions, like eVTOL aircraft. They generate revenue through two channels: selling finished battery products and providing customization design services. Additionally, Amprius receives revenue from a U.S. federal government reimbursement grant, adding up to $300k for the first half of 2024. However, this is not their main source of income. During the six months ending June 30, 2024, battery product sales were the dominant source of revenue, with no revenue coming from customization services. I considered including revenue figures below from their latest 10-Q. Q2 2024 10-Q As you can see above, a decent 146% YoY improvement in revenue during the first half of the year. This increase in revenue was driven by a $3.0 million rise in SiCore battery sales due to increased order volumes. As a side note, they only announced this product in January this year, and it seems it already has good traction. The latest 14A shows a beneficial ownership of 12.8% among all 10 directors and executive officers. A decent amount of skin in the game, in my view. The CEO, Kang Sun, owns 2.6% of the common stock alone. Challenges, Risks And Headwinds Let's start with dessert. The company is not profitable, with margins worsening from negative 109% in Q1 2024 to negative 195% in Q2 2024. Upfront expenses related to the ongoing design and regulatory approvals for its Colorado-based manufacturing facility played a significant role in this decline. These costs are adding to the company's overhead without any immediate benefit in terms of revenue generation or cost efficiency. Additionally, the company is still in the early stages of ramp-up, with a limited production scale despite accessing external manufacturing partners in Asia. In my view, until the Colorado and Fremont facilities are fully operational, Amprius may continue to struggle with high per-unit costs, putting downward pressure on margins. Let's have a closer look at the Colorado facility. During the Q2 conference call, the CEO provided an update on this site. Essentially, the design of the Colorado facility was only 60% complete, with cost estimates still subject to fluctuation. Management indicated that more accurate cost estimates would be available by the end of the year, but the fact that they mentioned possible fluctuations in their cost estimates could be a hint that the cost is higher than expected. As a side note, the Brighton facility will span 774,000 square feet, with an initial investment of $190 million. Once operational, this plant is expected to provide Amprius with up to 10 times its current production capacity. Management expects this new gigawatt-hour-scale battery manufacturing plant to begin operations in the first half of 2025, with the first operational phase focusing on SiCore batteries for the aviation sector. However, they are not alone. Currently, there is high competition, especially in the aviation battery market, with players like Concorde Battery Corporation, GS Yuasa Group, Saft Groupe SAS, Teledyne Technologies Incorporated, and SolarEdge Technologies. Another challenge that Amprius is facing is the long adoption timeline of its SiCore and SiMaxx battery platforms due to the extended validation and qualification cycles that customers must undergo. This is particularly the case in the aerospace market, where customers need to undergo 9 to 12 months of product modification followed by an additional production qualification phase, which can take up to 18 months. This lengthy process delays revenue realization and is easily visible on the cash flow statement. TradingView Outlook I'd like to start with price action. A quick look at the daily chart below shows a significant decline since the company went public in September 2022. TradingView Unsurprisingly, it has underperformed its sector, industry, and the S&P 500. Stock Rover As a matter of fact, in September, the company received a notice from the New York Stock Exchange that it wasn't in compliance with the continued listing requirement of $1 per share. Interestingly enough, since then, the share price has increased by 55%, currently trading at $1.33. There was significant volume after this announcement, which could be an indication that investors increased their confidence in the future of the company. TradingView A closer look at the income statement shows triple-digit revenue growth since Q3 2023. Seeking Alpha As already mentioned, the main driver was a $3 million surge in SiCore batteries in H1 2024 due to higher volumes from existing and new customers. Since then, the company has secured over $20 million in contracts to supply high-performance 40Ah battery cells for LEVs. These contracts are expected to be fulfilled by mid-2025. Just a few weeks back, Amprius signed a development contract to create a custom SiMaxx cell with a Fortune 500 company. They didn't disclose the name of the company; however, this contract could lead to orders for over one million cells annually if the development objectives are met. In addition, the company entered into a nonbinding Letter of Intent with another Fortune Global 500 company to develop SiCore cells for LEV applications. This agreement could result in more than 2 GWh of battery orders over the next five years. So, it looks like there is potential for further revenue growth. How about profitability? In my view, I am not expecting any change in profitability until the first phase of the Colorado facility is fully operational. In theory, this should happen in H1 2025, although I remain skeptical until there is a new update from the CEO in the next earnings release. Until then, depreciation, and the lack of scalability, will heavily pressure the gross profits and net income. Moving on to the balance sheet, I am encouraged by the negative net debt of the company. Why? Well, because they need oxygen until they become profitable. A company can't just survive on growth potential. Seeking Alpha In regard to their capital structure, I have included below a summary.  There is no long-term debt! (emphasis on the exclamation mark). Current lease liabilities sit at $1.92 million. Cash and equivalents are sitting at $46.4 million. They raised approximately $10.9 million from an at-market issuance sales agreement and an additional $13.6 million from warrant exercises.  As an additional note, the issuance sales agreement states that the company can sell common stock with a total offering price of up to $100 million. At the end of Q2, they had $89.1 million left, which is a decent amount of oxygen, considering that the Colorado site would require between $75 million and $100 million to achieve the 500MWh/year production capacity. Moving on to the cash flow statement, as mentioned in the previous section, the picture does not look very favorable. This is mainly due to the delayed revenue realization. Additionally, free cash flows look unfavorable due to the CapEx required for the Colorado facility. TradingView Moving on to insider activity, I remain disappointed with the lack of insider buying in this company. There are some selling operations; however, I am not overly concerned, considering their small size. The main selling operation was driven by Mirro Justin, a former director who resigned in September 2024. Again, I'm not worried about this sale, as he resigned. There was no recent activist investor activity; however, there was a significant spike in institutional investor interest in the company in Q2, 2024. Specifically, there was a 228% increase in new positions, a 55% increase in shares owned by 13F filers, and a 36% decrease in the put/call ratio. I believe there is a positive sentiment in this company among institutional investors. Moving on to valuation, the football field charts below shows that P/B and P/S are trading close to the 2-year minimum. Stock Rover In addition to low valuation ratios, the share price is trading close to the 2-year minimum. In my view, an interesting entry point for a long position in this company. Compared to its peers, the company doesn't seem to be overvalued. Actually, it sits at the lower end of the spectrum when sorting by P/B, in descending order. Stock Rover Conclusion To wrap up, I believe there is a compelling buying case for Amprius for investors with a longer timeframe. On the positive side, I am encouraged by the triple-digit revenue growth in the past few quarters, key contracts with large companies, including a $20 million deal for supplying high-performance batteries and a development contract with a Fortune 500 company, and a strong balance sheet, with no long-term debt, a solid cash position, and enough financial flexibility to support the development of the Colorado facility. However, there are risks to consider. The company is not profitable, with significant delays in revenue recognition due to the lengthy validation and qualification process for its batteries, particularly in aerospace. Additionally, the heavy investment into the Colorado facility is pressuring free cash flows, and gross profits, considering the increasing depreciation expenses. However, I believe that the current valuation ratios make sense, especially when compared to some of its peers. The increasing interest from institutional investors is encouraging, and the increase in volume since the NYSE compliance warning is a favorable sign.  Therefore, I believe this is an asymmetric opportunity, where the upside is significantly higher than the downside. Despite a highly speculative play, I maintain a Strong Buy rating for this company.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"analysis","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.2","shortVersion":"4.29.2","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2476488879"}