Company Profile- Cap-XX (Supercapacitor manufacturer)
Cap-XX stock price action
As of 16 June 2021, Australia-based Cap-XX market capitalization stands at $52.15 million. A year ago, in June 2020, the market capitalization of the company was merely half of what it is now. This was mainly due to uncertainty created by Covid19 and Cap-XX plans to shift its 4 Murata production lines (acquired in November 2019) from west japan to western Sydney. The process of shifting Murata production lines was complex and there was a lot of uncertainty about project completion as the process involved setting up a facility equipped with new air treatment facilities, utilities, and fire services. Further, the process of commissioning and factory acceptance is needed to be done to start production. However, as soon as the company cleared the air on the project in 1st week of November 2020, the stock price saw an uptrend and tripled its price in merely 2 months.
Cap-XX Business overview
The company, at its full capacity, expects to produce around 4.8 million DMF/DMT products per year and more than 2.4 million DMH products every year, once the final commissioning of the Sydney project is complete. Further, the newly installed production line will reduce the cost of production per unit. The company already has an order of more than 9 million units from its top 10 customers. The revenue ($2.75 million) of Cap-xx for FY2021 saw an increase of 12 % YOY. However, it has suffered a loss of $3.66 million for FY2021.
The company currently capitalizes on the IoT supercapacitor market in smart meters, security products, and medical devices. It has also entered the cylindrical supercapacitor market which is already very competitive and has thin margins. Surprisingly, Cap-XX management has stated that they are not going to indulge in producing large supercapacitors (which find application in the automotive industry) in near future. Further, Management has decided to keep its focus on various IoT markets such as tracking, automotive, e-locks, medical devices, handheld terminals, smart meters, wearables, and wireless sensors.
Cap-XX is making huge loses and its cash reserve is a mere $1.58 million. Their administrative, production, sales, and marketing cost are way too high. The company has not been able to cut costs or increase efficiency. However, the company has a strong patent portfolio which consists of nine patent families having 21 granted national patents and four pending patent applications. These patents helped Cap-XX earn $3.7 million through a patent infringement case against Locus. It also has an ongoing dispute on patent infringement with Maxwell technologies. This shows that their research team of 7 scientists and 16 engineers is efficient; however, the sales strategy of the company is not up to the mark.
Effect of External Environment on Cap-XX
The formation of the Quad group may have its pros and cons. However, it is a pain in the ass for supercapacitor manufacturers like Cap-XX. Let us understand, how?
Supercapacitors manufactured by Cap-XX find their application in IoT devices. More than 60% of the IoT OEMs are from Asia mainly from China, Japan, and South Korea. The formation of the Quad has soured the relation of both Japan and Australia with China. Further, China has scaled its supercapacitor manufacturing ability from 0 manufacturers in 2010 to more than 30 in 2020.
A supercapacitor trade ban from China to these countries can have an extremely negative impact on Cap-XX sales (more than 60% of Cap-XX sales come from Asia-Pacific). Cap-XX will not only lose a huge market but also face tough competition in other potential markets like Japan and South Korea.
What are Staticker analysts saying?
Well! The supercapacitor market is in its early days now. Commenting on a company’s future operating in a dicey market is difficult.
Large supercapacitors being used in power modules for applications such as regenerative braking, start-stop solutions, etc. have a huge moat. Regenerative braking has huge potential and can be used in many industries as it increases fuel efficiency. Cap-XX has kept itself away from this huge market and has rather decided to enter the small cylindrical supercapacitor market which has an extremely thin margin. This decision looks inspired by the fact that Cap-XX thin supercapacitors face brutal competition from cheap cylindrical supercapacitors flooding the market. Further, Cap-XX cash reserves are low. General & administrative costs plus production cost is astonishingly as high as 150% of its revenue. Even the net losses are 1.5x of the total revenue.
Moreover, the external environment doesn’t seem to be favoring them as there is an ongoing tussle between the Australian and Chinese governments. With more than 60% of its revenue coming from Asia; and China being the largest IoT OEM market, the risk of sales going drastically low is very much a possibility.
Analysts at Staticker are connoisseurs in the field of Supercapacitors. We believe that an informed decision will not only save an investor, millions of dollars but also help them earn billions. Staticker specializes in helping its clients focus their efforts, time, and money in the right direction.