Altech Chemicals Ltd

ATC Details

Altech Chemicals Ltd (ASX: ATC) was listed on ASX on 27th January 2010, it operates towards developing high purity alumina (HPA) manufacturing and mineral exploration and supplying ~99.99% (4N) HPA (Aluminum oxide (Al2O3)). It is focused on the sapphire/ light-emitting diode (LED) industry and the lithium-ion battery industry.

• Share Placement:ATC raised $10.3 million via share placement and share purchase plan to develop battery materials. The placement share was issued at $0.107/share led by ATC itself, which went oversubscribed.
• Green Status Awarded: The German battery materials plant was awarded green statis by Centre of International Climate and Environmental Research (CICERO) in Norway, for the proposed battery materials coating plat that was subject to a Preliminary Feasibility Study, undertaken by Altech Industries German GmbH (AIG).
• Securing Future EU Feedstock Supply:During the period, two Memorandum of Understanding (MoU) were executed by AIG, alongside two European based suppliers of lithium-ion battery grade anode materials. As of 31 December 2021, the company held a cash balance of $12.6 million.

Cash Balance (Source: Analysis by Kalkine Group)

Key Risks:

• Commodity Price Fluctuations: Considering the global fluctuations in commodity prices, the company’s operational and financial performance could be impacted.
• Climate Risk: Having its business into mining, adverse climate conditions make ATC susceptible to the temporary suspension and halt in the projects and operations.
• Regulatory Risk: The company is exposed to a more complex regulatory environment; any failure in the same could lead the business to fines, penalties, etc.

Outlook: HPA product being a high-value, highly demanded and high margin product expects its demand to increase at a CAGR ~30% from 2018-2028 to 272,000 tonnes in 2028, as claimed by the company. With ATC’s pilot project in Germany, its capacity of production will become ~120kg per day, put ATC in the sweet spot and benefit.  Project’s pre-tax NPV (Net Present Value) is expected as ~US$505.6 million at a discount rate of ~7.5% and an annual average net free cash flow of ~US$76 million at full production. ATC plans to raise US$144 million through issue of green bond. It also appointed DelMorgan & Co. to raise equity towards HPA project funding.

Technical Commentary: On the daily chart, though ATC stock prices are trading below the 21-period and 50-period SMA but taking a continuous support of horizontal trendline at $0.089. The RSI (14-period) is hovering in a mid-range at ~42.107 levels, indicating a directionless stance. Its immediate support level is $0.080 while immediate resistance level is $0.110.

Stock Recommendation: The stock of ATC has given a positive return of ~40.00% and corrected by ~20.86% in the past six months and one month, respectively. Its current market price is trading slightly below to its average of its 52-week low and 52-week high of ~$0.041 to ~$0.150. In addition, the stock is trading at a P/BV multiple of 1.6x as compared to the industry median (Metals and Mining) of 2.4x on a TTM basis. Thus, it seems that the stock is undervalued at the current trading levels. Considering the indicative valuation on a TTM basis, plans to issue green bond, exciting updates on Germany’s HPA pilot plant, virtual debt-free status, rising lithium prices and its expected exponential demand in future, decent liquidity position, current trading levels on technical analysis grounds, and key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the closing price of $0.091, down by ~3.192%, as of 8^th March 2022.

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing. 

ATC Daily Technical Chart, Data Source: REFINITIV

NOTE: Altech Chemicals Limited (Company) is a client of Kalkine Media Pty Ltd (Kalkine Media), an affiliate of Kalkine. However, under no circumstances have Kalkine or its related entities been, directly or indirectly influenced in making any recommendation concerning Company as contained in this report, and no form of compensation is or will be received by Kalkine, Kalkine Media or Kalkine’s other related entities for the publication of this report.

Note 1: The reference data in this report has been partly sourced from REFINITIV

Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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