Polypore Down 6% on Rumor It May Lose Big Auto Business (PPO)
A rumor is developing that technology filtration company, Polypore International Inc. (NYSE: PPO) has lost business because Asian competitors are severely undercutting PPO’s price.
Initial reports indicate that Polypore’s price for Li-Ion separator material is $1.60 per square meter. The overall price goes up to $2.60 per square meter after adding two layers of ceramic coating. According to the rumor, a Japanese competitor is offering the material for substantially less than Polypore.
The ceramic coating is important because it makes up for performance issues normally found with Li-Ion separators and makes overall Li-Ion separator quality less important than price, according to an unnamed source at LG Chem.
A source at Axiom Capital told Benzinga that Nissan recently moved to the use of ceramic coating on Li-Ion separators in response to heat-related battery problems with the Nissan LEAF. The Charlotte Business Journal quoted William Blair analyst, Brian Drab, in August as saying Polypore would probably continue to provide separators for Nissan.
Axiom, however, reported that after checking with Japanese company, Asahi Kasei, there was a suggestion that the company had won Nissan’s business away from Polypore due to its ability to undercut Polypore’s price.
In addition, another rumor said LG had qualified a Chinese separator supplier, a sign that eventually Li-Ion separator business would end up in the hands of the Chinese since they are capable of making the lowest cost commodity components parts in the world.
All this is potential bad news for Polypore. Axiom pointed out that the last time the company lost LG business, the stock dropped more than 20 percent in one day. This was in January 2012 when LG Chem announced it planned to have its own separator plant up and running in the second half of the year. At the time, Axiom started coverage on Polypore with a “Sell” rating.
Meanwhile, Forbes reported that shares of Polypore International Inc. fell below its 200-day moving average of $41.23, going as low as $40.90 per share in trading Wednesday morning.
At the time of this writing, Jim Probasco had no position in any mentioned securities.
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