I've been absent for a while but with the latest unfoldings I couldn't resist.
NVX is poised to be an absolute monster
In Dec 2024 they guided for Operating Margin of ~25%
BUT, as noted, this does not include any impact from tariffs.
Since then, here's the tariffs that have been applied: Section 301 - 25.0% Retaliatory / reciprocal - 30% CVD - 11.5% Anti-dumping tariffs - 93.5% IEEPA (temp) - 20% Total = 160% (+potential IEEPA)
So, what does this do to margin?
Well, it will basically add to the selling price NVX can capture. If we assume the previous price of $7k/tonne, the revised post-tariff sell price equals $18k (+160%). Let's assume 20% discount to get more volume, still gives us a plump $14.5k
If COGS were $6k before tariffs they are $6k after. NVX has a localised US supply chain. Sweet
So our anticipated margin goes from $1k to $8.5k / tonne.
If NVX pops out 30k tonnes, that's a juicy $250M USD in GP. And all that extra juice flows to the bottom line.
Things obviously get even juicier at 75k tonnes and 150k tonnes. And unit economics get even better.. Not bad for a company with a market cap of 380M AUD (250M USD)
Now, the problem of course has been execution. Where is that damn production. The promises have been made but the actual production and firm POs have yet to materialise.
BUT, I would not be surprised, at all, if this was a PURPOSEFUL TACTIC of the US battery makers. They have been hooked on cheap crack from China. It has served their purpose to push back on potential tariffs, "oh sorry Mr President, you can't tariff graphite because there is no current US option that meets our validation specs or capacity needs".
These tariffs have been in the wings for an age (as well as the FEOC and local content requirements to qualify for credits), but they kept getting kicked down the road due to exactly this push back.
Well, tariffs are now finally in, and it will be interesting to see the tier 1s lining up to get their required volumes.
Very interesting.
When this moves it gonna move big.
CB
NVX Price at posting:
59.3¢ Sentiment: Buy Disclosure: Held
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