Tirupati Graphite Re-Invents Copper
It is less than 6 months since(TGR ) listed on the London market, and what a time it has been for the company. Indeed, TGR completes a Golden Trio of successful resources IPOs since the pandemic began, perhaps rather more well stacked up and understandable than some of the more “fashionable” IPOs related to CBD or food delivery.
The Initial Valuation
Even better, the merits of the Tirupati offering were not only clear at the time when it came to market in early December, they were highlighted here.
“45p a share or £33.5m valuation suggests is that the company will initially be trading on a one times multiple of forecast 2023-2024 earnings of £50m. This would be only a tenth of broker Optiva’s NPV of £315m and well under a quarter of the £169m risked valuation.”
Also in December it was highlight that the company is cash generative with established operations including primary mining and processing in Madagascar and hi-tech graphite processing in India to produce speciality graphite. At the time of the IPO Tirupati was also due to establish a state-of-art graphene and technology R&D centre in India.
Clearly, the technology centre has come up trumps today for Tirupati and its shareholders. Indeed, if there is a surprise regarding this development, it would be that by its very nature, it is not every day that a company with an £80m market cap delivers a transformational breakthrough, especially one which will be of material benefit (literally) throughout the world.
A Water Into Wine Moment
The news that Tirupati has developed a ground-breaking graphene-aluminium composite which exhibits significantly higher conductivity and strength properties over aluminium and comparable to copper, is simply incredible. By definition, it is rare that anyone is able to replace a key natural resource. For instance, in its own way the graphene -aluminium composite is as significant in its own space as a crude oil substitute or one for plastic. In terms of how common aluminium is as compared to copper, to suggest that Tirupati have achieved the equivalent of turning water into wine is not necessarily hyperbole.
Uses For A New Al-Gr Composite
To take things forward Tirupati says it has now engaged with potential end users including a FTSE 100 company for its potential use replacing copper in thermal, power and propulsion systems, which provides significant advantages owing to reduced weight. What will be interesting to see is how widespread the use of the Al-Gr composite will be, with it being likely that we are only at the foothills of the applications it can be used for.
Of course, all of this leads us to wonder what the effect on the valuation of Tirupati Graphite might be? If Al-Gr was the property of a new company set to list on the stock market, “New Copper” could quite understandably be valued at hundreds of millions of pounds. Indeed, most companies with international scalability in the technology or natural resources space have valuations at such levels. Given that Tirupati was floated at just one times 2023-2024 earnings, and without Al-Gr in the mix at the end of last year, it would appear that shareholders of the company not only have the ongoing re-rate of a company floated at a “priced to fly” level, there is the bazooka of it having re-invented the (copper) wheel.
Potential Spin Off?
Having delivered a constant stream of significant newsflow in a textbook manner over recent months, one can expect the latest from Tirupati to be offered to the market in the company’s characteristically efficient manner. The rest of 2021 will be eventful, especially with some in the market hoping that Tirupati with eventually move to extract further value for its shareholders by spinning off its technology division and / or its new composite.
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