Description

This idea is mostly suited for PA as the current average daily volume is only ~660K in USD terms. This is a timely idea and so I will keep this relatively short. This is also a high-risk company in early revenue stage.

A few weeks ago, the company was added to the Tel Aviv 90 index. This created more liquidity that enabled shorts and hedge funds to sell. The company sold off from a high of almost 4000 at end of January to a low of 1171 just a couple of days ago. In March alone the stock dropped 58% – this all happened on basically no news and elevated volumes as can be seen below.

Volumes came down beginning in March 19^th which indicated to me that the technical selling was done. On March 27^th and 28^th we saw consecutive days of significant price increases (22.6% and 19.7%). I suspect that the selling has ended and that we will see this going beyond the 52 weeks high in the next few months.

The Company and Product –

Apollo Power (APLP) is an Israeli clean-tech company traded on the Tel Aviv Stock Exchange that operates in the solar energy space. The company has unique tech and IP to create lightweight (one sixth the weight of a standard panel), flexible and durable solar sheets that have many potential use cases, including:

• Buildings – many buildings use solar panels to offset some of their electrical footprint. In many cases, standard panels are unsuitable due to their weight or aesthetics. The company’s product is much lighter, and can be integrated into building materials, making it much more aesthetic.
• Floating solar – placing solar panels on water bodies is a common use for the unused surface. The company’s product can be used without the need of large plastic floating devices (since the panels are lightweight and can easily float with thin flexible floaters). This is a major advantage from a shipping standpoint as the solar sheets can be folded and save a lot of space when transported.
• Agro-solar – greenhouses used in agriculture, usually receive direct sunlight and are not sturdy enough for traditional panels, making them a great target for the company’s solar sheets.
• Automotive – The company’s product can be integrated into the roof of a vehicle as well as the hood in a very aesthetic manner. This is very relevant for electric and hybrid vehicles.

Following are a few pictures that illustrate the different use cases:

A vehicle engine hood prototype

Solar pavements at an Amazon facility

Flexible solar sheets

Backlog and New Manufacturing Facility:

The company recently opened its first manufacturing facility (previously used small-scale “laboratory” facility) that should hcapacity during have 190MW annual capacity by H2 2023. This facility will only manufacture the solar sheets and will not manufacture the integrated products (pavements, vehicle parts, etc). At full capacity, and based on standard solar panels pricing, I estimate the annual revenue from this facility alone to be USD 300M.

So far, the company won a small deal with an Israeli trucking company to place the panels on the roofs of 96 trucks and reduce fuel consumption. The company also won a deal with the Israeli military to wrap unused vehicles (tanks for reserve useage for example) with a solar “blanket” to avoid battary depletion. The company also won a Euro 33M deal (over 10 years) with VW for an aftersales product to be used in a single VW model to charge the car’s battery.

The company is in discussions with Amazon (for roofs of facilities and solar pavements), Hyundai, Audi, Renault, and several Israeli companies. I suspect that the manufacturing limitations as well as some standards they need to comply with were holding them back – all of which will be resolved in the next few months.

Valuation

The company has a market cap of USD 213M assuming a share price of ILS 17.59 and 43.6M shares outstanding. The company has USD 23M in cash and no debt. The company burned USD 15M in 2022.

I make the following assumptions on valuation:

• The company reaches USD 300M in revenues in 4-5 years.
• 35% of dilution will take place during this period.
• The company will earn 5x revenue multiple, similar to that of SolarEdge, a 15B market cap Israeli solar company.

The result is upside of 5x from the current share price. That being said, this is just to see that value wise this makes sense. The bet here is more on the technical selling abating.

Catalyst

• Technical selling connected to the inclusion of the Tel Aviv 90 index is done.
• Potential dual listing on NASDAQ seems appropriate and could serve as a catalyst.
• Announcing of additional negotiations or contracts.