Polypore (PPO) Buy Rating Reiterated at Topeka Following Panasonic Letter of Intent

Topeka Capital earlier maintained a Buy rating on Polypore International (NYSE: PPO) with a price target of $51. Yesterday Polypore and Panasonic announced that they have signed a letter of intent to work together in the development of coated and uncoated Celgard® brand separators to meet Panasonic's requirements for their next generation cylindrical battery cell production for various applications globally. It also reported Q3 results.

Analyst Chris Kapsch said, "PPO reported a slight EPS beat, but its joint development agreement with Panasonic for advanced cylindrical Lithium Ion batteries [we presume inevitably for Tesla, among other Panasonic customers] should rightly steal the headlines."

"Assuming Polypore becomes the sole separator supplier to Tesla’s gigafactory, the vehicle application may require ~350mm square meters of separator material annually, translating to perhaps $140mm in incremental margin dollars for PPO, or over $2.10 per share, based on reasonable pricing, margin, tax-rate, and share count assumptions. Thus, considering our 2015 earnings projection of $2.10/share (under review), revenues from Tesla alone could effectively double PPO’s EPS by the end of this decade. Based on Tesla’s current time-line, the Gigafactory is not expected to begin producing batteries until 2017. Notably, this time-line is consistent with the commercial time-line mentioned in the context of PPO’s joint development agreement with Panasonic, targeting commercialization within a 12-18 month period. Clearly, this is a longer-term opportunity, but potentially a game changer for PPO’s growth prospects," added the analyst.

For an analyst ratings summary and ratings history on Polypore International click here. For more ratings news on Polypore International click here.

Shares of Polypore International closed at $42.94 yesterday.

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