I've been pushing top down analysis since last spring.
You wrote: Everyone on the thread has "assumed Valence will sell all it can produce" without challange. What you need to do is make a top down estimate to check your bottom up analysis. Estimate total lithium-ion polymer battery demand and then allocate it among the companies running production lines (pilot/semi/full/high-speed). The critical analysis is determining the unit demand for the bellcore derivative batteries (in addition to all the others). No one here has done that and I am not going to give away my number. But, at the very least, the elements that must be determined at the beginning is an accurate analysis of competitors and currently producing competitors (and anyone else w/in a year).
gvander, I've been working on market demand and pricing since last spring on this thread. I have numerous posts to that issue.
My forecast is that portable computer batteries total demand is about 20-22 million per year (original equipment sales + spares + replacements). Valence's initial production line breaks the company even on cashflow at a rate of around 600,000 a year. This is only 3% of the market. Why is this unreasonable?
Using Fred's number of 5700 per day, this about 2 million a year or approximately 10% of the current market. I have posted that its unlikely we will hit this rate immediately, but in a year, its possible. Remember that the portable computer segment is growing about 25% annually.
As for cellphones, the current year sees handset sales of 100 million, and next year 140 million. The total market, including spares and replacements, could be in the 200 million range by next year. One of Valence's cellphone lines will produce something in the 5-8 million range, so perhaps 2-4%. Is this unreasonable?
You would think the market will reward the lowest cost producer, as well as the higher quality producer. I understand, that ignoring sunk development costs, Lithium polymer will eventually be lower cost per Wh capacity to produce than liquid Li-ion. Don't you think that achieving a 25% market share for Lithium polymer in five years is do-able?
What am I doing wrong?
I run these numbers, and I get an annual rate of $200M+ for Valence in about a year. The S&P sells at about seven times revenues; if I use just 5 times revenues, I get a $1 billion market cap. This is a stock price of about 35.
If the company is very profitable, as I suspect, the market cap will be even higher. Of course there are risks and downside as well. But I think this is an attractive risk adjusted investment, albiet a speculative one.
Paul |
