Will electric vehicles drive the future? Well, filtration company Polypore International (NYS: PPO) seems to think so.
Most of the company's expansion plans revolve around these vehicles, which have also been the reason behind the company's higher third-quarter revenues. Is this reason enough to treat the stock positively? I'll try to figure it out.
Numbers you should know
Polypore's revenue rose 25% from the year-ago quarter to $190.1 million. Sales in its largest segment, energy storage, which makes membranes for lithium and lead-acid batteries, grew 29% to $146 million. The biggest driver behind this was the solid 65% growth in the sales of lithium battery separators.
While lithium batteries are useful for a wide range of electronics from notebooks to phones, what's interesting to note is that it was the growing demand in electric drive vehicles that fueled Polypore's sales.
In Polypore's other segment, separations media, which makes membranes catering to the health care sector, revenue rose 15% to $44.1 million, driven by higher volumes.
Backed by strong top-line growth, Polypore's net income surged from $12.4 million in last year's third quarter to $23.6 million this quarter.
Demand for lithium batteries is indeed shooting up, more so because of the rise of EDVs. Consider how big automakers are turning their heads toward the electric technology. Some of the biggest names have been backingTesla Motors' (NAS: TSLA) electric run, and Tesla's order bag is getting heavier by the day. Auto giant Ford Motor's (NYS: F) optimism around electric vehicles is also clear from the company's plans to increase its electric vehicle production threefold by 2013.
There are many similar stories around, all suggesting the same thing -- electric vehicles are gaining traction. As for Polypore, this could certainly mean more business and higher revenues.
This optimism has prompted companies to invest more in their lithium battery businesses. For instance, Advanced Battery Technologies is setting up of a polymer lithium-ion battery production facility in China. A123 Systems (NAS: AONE) also recently extended its partnership with a Japan-based manufacturer to cater to the higher demand for lithium-battery-driven electric cars in the Japanese market.
Likewise, Polypore is expanding its lithium business, particularly those targeted at EDVs. After a successful recent first expansion, the company is now undertaking a second expansion at its Charlotte, N.C., facility. Its Concord, N.C., facility expansion is also specifically targeted at EDVs and is expected to be fully operational in 2014.
It's not just the lithium business that Polypore is focusing on. It is also expanding its lead-acid separator business in China and adding additional capacity in its Thailand facility.
Undoubtedly, it's good to see the company growing its business further, especially in emerging markets.
The Foolish bottom line
Polypore's line of business is such that its products should only find more use further on. Strong numbers are a definite plus, and as I noted last quarter, Polypore's ramping up capacity makes a lot of sense to me.
I suggest you keep an eye on Polypore. The future for electric vehicles will play a big role in shaping up Polypore's future.
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At the time thisarticle was published Neha Chamaria does not own shares of any of the companies mentioned in this article. The Motley Fool owns shares of Ford Motor. Motley Fool newsletter services have recommended buying shares of Ford Motor and Polypore International. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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