Amprius Technologies: Upgrading On Product Validation And Growth Forecast

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Amprius Technologies: Upgrading On Product Validation And Growth Forecast

seekingalpha2023-12-13

AMPX has developed a host of high-profile customers and long-term supply contracts, indicating exponential revenue growth potential.The company has successfully manufactured and delivered products to ...

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PeanutButterMonster
·01-30
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I liked the Silicon Anode technology of the company, which has the potential to improve the performance of lithium batteries by a factor of 10. However, they had not yet developed any commercial customers and had just received their first order to test and validate their product. Amprius had not proven they could manufacture at scale a product that had proven notoriously difficult to build for more than a decade. The news from Amprius over the last 12 months has been transformative; they have developed a host of high-profile customers with some long-term supply contracts in place. The commercial-scale manufacturing line appears operational, and its capacity is sold out for 2024. A larger facility will be completed and ready for 2025; much of that capacity is already sold. This real exponential growth story could see revenue growing in the thousands of percentage points over the next two or three years. Amprius History Recap I covered the history of Amprius in my first article and provided a summary here. 2008 Amprius Inc. was founded to commercialize Silicon Anode technology developed at Stanford University. 2014 Silicon wire structure and chemistry finalized. 2016 Kilowatt hour production line established in California. 2018 first trial order from Airbus announced. 2022 Merged with SPAC Kensington Capital Acquisition Corp IV, joining the NYSE. Amprius has one key technology, a patented silicon anode with the theoretical possibility of multiplying the energy density of a Lithium Ion battery by ten when compared to the standard graphite anode. Silicon anodes are notoriously difficult to manufacture. Previous attempts have failed many times. Amprius developed a Silicon nanowire technique that bypasses many problems that arose with earlier attempts to commercialize this idea. Developments During 2023 Customer Updates The original customer, Airbus, looked at Amprius batteries for use in their HAPS (High Altitude Pseudo Satellite system). I covered this in detail in the first article, when it seemed very promising. In July 2023, the HAPS drone completed its first stratospheric flight at 66,000 feet. Amprius has provided an ongoing story of its developments in press releases; the following is a summary of the ones that relate to new customers; they can all be viewed on the AMPX investor page.   Date Summary   Nov 6th signed purchase orders with three electric aviation manufacturers for custom cells from its 450 Wh/kg ultra-high-energy density platform for battery pack development and qualification. These new cells are the only commercially available batteries that can provide enough power and endurance for high-altitude pseudo-satellite flight applications. Their commercialization is scheduled before the end of the year.   Oct 5th secured a purchase order from an eVTOL manufacturer, Amprius can extend flight ranges by up to 50% and enhance payload capacity. Sample custom cells to be delivered later this year. If the cells are qualified, the manufacturer will receive more custom samples in early 2024 for their demonstrator integration. Amprius hopes to initiate talks for a long-term volume purchase agreement to support the eVTOL manufacturer's pre-production units in 2025 and beyond.   Sep 11th Tenergy has launched battery packs for the UAS market, featuring advanced cells that offer longer range and additional payload capacity. This is the first integrated pack of its kind in the market. It will help address the demands of the UAS industry, providing unparalleled flight time and range thresholds that will transform performance metrics for the UAS industry.   April 12th Amprius supplies high-energy density lithium-ion battery cells to AeroVironment's Switchblade 300 Block 20 system, improving flight time by at least 50%. Amprius has been delivering cell shipments to AeroVironment since 2022 and is fulfilling additional commitments for the future. Additionally, AeroVironment is integrating Amprius cells into some defense products and is a strategic investor in the company.   Click to enlarge In the Q3 earnings call, further details on customer engagement were given. AMPX delivered products to 38 customers (18 new to the company) in the quarter, a record. Tenery signed a long-term supply agreement for Uncrewed Aerial System battery packs. AeroVironment (AVAV) provided forward orders, and an eVTOL manufacturer provided a volume purchase order. Manufacturing Updates The Kilowatt Hour line built in 2016 was the only production line for Q3 2023. New equipment had arrived when I wrote my last article and is now installed. An investor day will be held later this month to showcase the new production line to the press and customers. The new line has a capacity of 2 megawatt hours per year. In September, Amprius received permission to rezone their site in Colorado to manufacture batteries. The Colorado site will have a 2025 capacity of 500 Mega Watt hours using the same technology as California's 2-megawatt-hour line. When fully developed, the site will have a maximum capacity of 5 gigawatt hours. Product Updates In November 2022, Amprius was working on its 400 watts per Kg battery; things have moved forward quickly. The 450 Wh/Kg battery is now commercially available, and the CEO believed it was the only battery of this energy density on the market. The 500 Wh/Kg battery will be shipping in 2024; another notable achievement was the July announcement that the US Army had successfully performed the nail test on an Amprius gel polymer electrolyte. The battery dramatically extends mission time. In October, a competition for solar cars, \"The Bridgestone World Solar Cup,\" results showed that cars using Amprius batteries had a 30% advantage in capacity. As a result, the top 4 finishers were all powered by Amprius batteries. Forecasting 2024 and 2025 Amprius had an outstanding 2023, meeting all of my goals - validation of the technology through repeat commercial orders and proving the ability to manufacture at scale. I will now try to use the information garnered from the last twelve months to give a forecast for the revenue the company could generate over the next two years. In the Q3 earnings, the CFO reported that they had generated $2 million from the sale of batteries and were now constrained by capacity. This implies that the current maximum capacity of the company is $2 million per quarter or $8 million per year. In the Q3 2022 earnings call, the CEO said that the manufacturing capacity was at the Kilowatt scale (using the line installed in 2016), and the new megawatt-scale equipment had arrived. He said in the Q3 2023 earnings, \"We plan to deliver two MWh capacity initially in 2024, which is about 10 times our current production capacity.\" The new equipment will be online for 2024, giving them a potential maximum capacity of $8 million x 10 = $80 million. (assumes no price changes or volume discounts) In the Q and A section, the CEO said, \"We sold out our 2024 production\" If the entire production for 2024 is sold, we might expect revenue of at least $50 million. I have reduced the $80 million by 25% to account for volume discounts and a further $10 million for the inevitable manufacturing downtimes, supply constraints, and other problems plaguing the market. Forecasting 2025 is more complicated. In terms of capacity, the CEO said when discussing the Colorado facility: The initial production capacity is expected to be 500-megawatt hour annually, and we will focus on aviation batteries in this stage. We plan to have this phase operational in 2025. We don't know when in 2025 it will come online, but if the 2024 capacity is already sold out and they have orders for 2025, I would expect it to be a priority. Regarding orders for 2025, the CEO said we also received forecast customer demand to serve the larger aviation segment with tens of MWs of production through and beyond... We have customer give us the indication, okay, over 100 megawatts, Sometime in 2025, we could see sales running at more than 100 megawatts per year. That would be 2024 revenue x 40, giving a genuinely astonishing revenue forecast of $2 billion annually. Finances and Risks At present, the AMPX balance sheet looks pretty solid. Balance Sheet (Author Database) The $60 million in short-term assets gives it more than a year's cash runway, and it has no debt. Risk 1: The cash needed Forward guidance paints another picture. The CFO guided the CAPEX spend to complete the build-out of the California factory and the Colorado site. AMPX expects to spend around $6 million on the California site in the remainder of 2023 and up to $30 million at the beginning of 2024 to start the build at Colorado. That is only the start of the build-out of the new site, and it means they do not have enough cash to get to 2025. The CFO explained the plans to raise capital to complete the capacity expansion, including a shelf registration for a $100 million ATM facility, part of the $400 million they are allowed. That is a significant dilution when the current market cap is around $350 million. Risk 2: The Revenue forecast I explained my revenue forecast in that section; however, readers should be clear that my view is, as usual, different from that of most analysts. 5 Wall Street Analysts cover Amprius; they forecast the same exponential growth as I do but have it beginning a year or two later than me Wall Street earnings forecast (simplywall.st) These five analysts give a price target for Amprius of $11.83 in 12 months, a nearly 200% rise. Risk 3: Competitive Advantage The nature of competitive advantage is changing; it used to be around products and barriers to entry; however, the pace of development has changed so much that what seems like a significant advantage can evaporate quickly. In the Amprius case, this could happen before significant earnings are reported. The 500 Wh/Kg they are guiding to could become commonplace in pretty quick order. A Chinese group published a paper saying they have achieved 711 Wh/Kg in the lab, and CATL, probably the world's biggest battery producer, has said its new condensed electrolyte battery will be capable of 500 Wh/Kg next year. Competitive advantage is now about a company's ability to manage this disruption, keep improving its products, and remain at the forefront of technological development. In this new order, companies must develop a rapport with their customers so they choose to do business with them even though a competitor may offer a similar product. In the modern age, being liked is very important. AMPX has some advantages; it has worked hard with its customers, and they are signing long-term contracts. AMPX is an American company that manufactures in America and sells predominantly to American military and aviation companies. That will give them a competitive advantage against many suppliers. They have developed a new technology and are bringing improvements to the market quickly. Risk 4: Ownership AMPX is a controlled company; 74% of it is owned by Amprius Inc. I was initially concerned when I read this, but Amprius Inc. is the original private company that merged in the SPAC deal. The ownership of Amprius Inc. is as follows. Amprius Inc ownership (Gurufocus) In SEC filings, Amprius Inc. is described as both Legacy Amprius and Amprius holdings, but they are the same people, the founders and shareholders of the original private Amprius. One interesting name on the list is Justin E Mirro, a QuantumScape Corporation (QS) director brought to the market by Kensington Capital Acquisition Corp I in 2020 - Justin is the founder and CEO of Kensington Capital Partners. Conclusion Amprius has spent the last 12 months developing its customer base and building its first commercial-scale manufacturing facility. It has signed up some high-profile customers, some of whom have committed to longer-term supply contracts and provided future guidance for large-scale adoption of the Amprius technology. The build-out of the megawatt manufacturing technology appears complete and may provide a ten-fold increase in capacity. The CEO has guided that capacity to being sold out for 2024. The build-out of the gigawatt facility has already begun, and it is due online in 2025. AMPX has already started accepting orders for that site and implied it may be sold out before it begins operation  I am long AMPX with a target of $10 per share over the next 12 months.","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":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[{"id":268378005409880,"gmtCreate":1706544875470,"gmtModify":1706544880070,"author":{"id":"4107067226858820","authorId":"4107067226858820","name":"PeanutButterMonster","avatar":"https://community-static.tradeup.com/news/b755699bba0c75bab0fb8daf50e5b7f1","vip":1,"crmLevel":5,"crmLevelSwitch":0,"authorIdStr":"4107067226858820","idStr":"4107067226858820"},"htmlText":"Great article","listText":"Great article","text":"Great article","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":0,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/268378005409880","repostId":2391538859,"repostType":2,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"}],"hasMoreComments":true,"newsSizeData":{"likeSize":0,"commentSize":1,"repostSize":1,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false}}