Ilika LON:IKA the Southampton-based, AIM-listed, solid state battery technology company has published its half-year report for the six months ended 31 October 2023.
We’ve had this stock on our ‘one to watch’ list for bang-on a year now and in that time Ilika’s stock has had it peaks and troughs, rising to a high of 72p and falling as low as 24.99p over the last calendar year.
The battery manufacturer opened trading at 37p on Tuesday (23rd January) and over one-year has fallen about 19.5%, but over the longer period of five-years is up 37%. It was a tough year for UK equities last month, but we still believe in the micro- and macro-economic themes that are playing into Ilika’s story and as a result still believe it merits a place on the watch list.
Ilika ramping up commercial production
Berenberg Bank agrees, rating Ilika a ‘Buy’ with a target price of 110p on Tuesday morning. James Carmichael, an Energy and Environment analyst for the bank said: “Ilika is ramping up commercial production of its smaller Stereax cells and has the right partnerships (and now funding) in place to enable large-scale production of the bigger Goliath battery. The EV market, in particular, could be transformational for Ilika, and we point to partnerships with Honda, McLaren, Jaguar Land Rover, the UK Battery Industrialisation Centre and Comau as encouraging signs that the Goliath format is maturing.”
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We last reported on Ilika in October 2023 with the share price around 31p. It’s put on about 20% since then, which although not earth-shattering, is making progress in the right direction and if you believe the forecasts of Liberum and Berenberg has a lot of room to grow.
In the real world it seems Ilika is making progress too. As reported, the Hampshire company is locked-in with the Automotive Transformation Fund (ATF), 16-month collaboration programme, securing a GBP0.4m grant to help scale-up Ilika’s Goliath pilot production facilities. As reported, Ilika Goliath batteries are ruggedized large format battery for electric vehicles and consumer appliances, the opposite end of the scale to Ilika’s other primary product, Stereax, a micro- solid-state battery for healthcare applications, fitted to medical devices which are then implanted or attached to patient’s bodies.
550% revenue increase
The company reported half-year revenues of GBP1.3m, a 550% increase year-on-year and to that added another GBP1.3m in grant funding – a significant uptick from the GBP200,000 it had manged in the same period in 2022. The company had GBP13.2m in cash on hand at the end of the period.
Nonetheless, Ilika was still making an EBITDA loss, booked at GBP1.9m, but cut this by 53% y-o-y, and if the company remains on this trajectory, should before long break-even and then edge into profitability. Just like in lower-league football management, you are buying cheap now, in the expectation of future potential.
As the year closed, Ilika hit development milestones in building a prototype Goliath battery for commercial clients, achieving lithium-ion energy density parity with its Goliath range. Given the drive to electrify transport, Golaith is, for sure, an exciting product. But we should not gloss over the agreement that the battery company signed with Cirtec Medical last summer, as that deal represents Ilika’s most immediate commercialisation opportunity, allowing fulfilment of its order book and the possibility of further opportunities for commercial engagement, something Liberum Capital highlighted in a note on Tuesday.
Licencing deal in the US
Ilika will be licencing Cirtec, the Minnesota-based, active implantable medical device manufacturer, to manufacture its Stereax battery in the US with an initial profit-share agreement followed by a royalty-based revenue deal.
Sam Wahab, an analyst for Liberum said: “Our valuation suggests that Ilika’s shares trade at a compelling discount to NAV ahead of several share price catalysts across its core divisions in 2024. Alongside Cirtec, Ilika has line of sight on commercialisation at Stereax, while Goliath is seeing increasing advancement. Ilika continues to lead the 24-month GBP8.2m Faraday Battery Challenge collaboration programme, Project History, to integrate high silicon content electrodes into its Goliath SSB to enable automotive level performance. Ilika is receiving a grant of GBP2.8m over the 24-month programme, which commenced on 1st February 2023 and underpins our current financial forecasts.”
Liberum recommends Ilika as a ‘Buy’ with a target price of 65p. The battery company is pushing to scale-up, targeting an installed capacity of 1.5 MWh/a to allow it to scale production volumes and mature its technology to the level required to respond to automotive requests for quotation by the end of 2025.
Graeme Purdy, Ilika’s CEO said in a statement: “The first half of this year was important for Ilika on both sides of the business. We were delighted to successfully convert our memorandum of understanding with Cirtec into a ten-year licensing arrangement. […] Regarding Goliath, we have successfully delivered against our technology roadmap, with two key milestones achieved at the end of 2023. Having reached lithium-ion energy density parity and continuing to work towards further energy and power density milestones, we have proved that our batteries stand to deliver the clear benefits of solid-state architecture, and from here we will continue to pursue further energy and power density milestones.”
