MLV Initiates Coverage On Polypore, Sees 21% Upside For The Stock


In a research note released today, MLV analyst Carter Driscoll initiated coverage on shares of Polypore International (NYSE:PPO) with a Buy rating and a $46 price target, which represents a 21% upside from where the stock is currently trading. 

Driscoll wrote, “PPO supplies specialized polymer membranes – ‘separators’ – used in separation and filtration processes for applications in transportation, industrial, consumer electronics and healthcare markets. Three of the company’s four segments generate stable revenue growth (mid- to-high single digit annual growth) with solid cash flows (EBITDA margins in the 20-30% range). The real story is the 4th segment – separators for lithium-ion (li-ion) applications including electric- drive vehicles (EDV) and consumer electronics – for which we expect 20%+ annual revenue growth with incremental margin contribution in the 50%+ range. Overall, we forecast an 11% CAGR in revenue (~$678M in FY14E to ~$830M in FY16E) and ~33% CAGR in EPS ($1.41 in FY14E to $2.52 in FY16E), driven by unit volume growth, changing product mix and expanding operating leverage.”

The analyst added, “We believe EDV growth is stronger than investors expect. PPO’s products are designed into over 50 models on the road today and consumers are shifting purchases towards plug- ins (PHEV) and battery-only (BEV) models, which should drive high separator dollar content for PPO. Margin expansion is tied to EDV growth as incremental margins are >50%, driven by 20%+ CAGR in revenue in PPO’s li-ion segment.”

According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Carter Driscoll has a total average return of 8% and a 37.5% success rate. Driscoll has a 6.6% average return when recommending PPO, and is ranked #2825 out of 3352 analysts.

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