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Sunday, April 4, 2010

Electric Car Demand Means Polypore's Battery Parts Outpace Wind and Solar‏


Polypore International Inc., which makes one of the key components of electric-car batteries, is climbing faster than most alternative energy stocks this year as investors bet on a global shift to low-polluting automobiles.

The company based in Charlotte, North Carolina, is about to finish the first quarter with a 46 percent increase to $17.34 a share, the top gainer on the WilderHill New Energy Global Innovation index. The benchmark of 86 clean-energy stocks sank 10.2 percent in the period, pulled lower by Vestas Wind Systems A/S, the biggest wind-turbine maker, and German solar developer Solarworld AG.

“Polypore is positioned to take a solid chunk of the growth in electric vehicles,” said Bryan Drab, an analyst at William Blair & Co. in Chicago who has a “outperform” rating on the stock. “They supply to most, if not all, the major makers of lithium car batteries that are going into electric cars.”

The company is the world’s biggest producer of porous membranes used in traditional lead-acid batteries for cars. It also makes the chemical separators for more potent lithium ATV batteries used in electric vehicles made by General Motors Co., Toyota Motor Corp. and Volkswagen AG.

The separators keep apart positive and negative charged electrodes while allowing the ions powering the battery to move within the unit.

This month, the company forecast electric vehicles will make up 3 percent of global car sales by 2012, and 6 percent by 2015, compared with about 2 percent now.

Investment Plan

Polypore plans to spend $102 million over two years to double production of separators for lithium cells. It competes with Asahi Kasei Corp. and TonenGeneral Sekiyu K.K., the Japanese unit of Exxon Mobil Corp. TonenGeneral and Asahi Kasei shares both have risen 10 percent since the beginning of March. Polypore gained 14.8 percent this month.

The three together provide 90 percent of the market for lithium separators, said Polypore Chief Financial Officer Lynn Amos. Polypore is also increasing output in Korea for cell-phone sized separators.

Founded in 1994, Polypore sold its shares at $19 in June 2007, rose as high as $29.26 in August 2008, and dropped to as low as $2.38 in March 2009 during the credit crisis and recession.

Another drag on Polypore’s shares was ruling from the U.S. Federal Trade Commission recommending the company divest most of its Microporous unit, the only maker of rubber-based membranes for lead-acid batteries. Polypore is appealing the ruling.

“The FTC complaint came out in September 2008, and we were concerned we’d be forced to sell at a loss during the banking meltdown,” Amos said in a March 26 interview. “At this point, we could probably make some money if we had to sell.”

Morgan Stanley increased its stake in Polypore to 1.48 million shares as of Dec. 31, or 3.3 percent of the company’s outstanding stock, according to data compiled by Bloomberg. Morgan Stanley funds control 2 percent of the company. The bank holds the rest for Van Kampen Investments Inc., the data show.

Erica Platt, a Morgan Stanley spokeswoman, declined to comment on the holdings.

Polypore also benefited from the extension of a contract with one of its largest customers, Drab said.

On Jan. 19, Exide Technologies renewed a contract that expired last year. Polypore plants have supplied the Milton, Georgia-based producer of batteries for more than 40 years, and the agreement extends the contract for three years.