Why this ASX battery materials stock could rocket 60%

The battery materials industry has been largely a sea of red over the last 12 months.

However, there has been at least one exception.

During this time, the Alpha HPA Ltd (ASX: A4N) share price has actually managed to rise by almost 11%.

As a comparison, Core Lithium Ltd (ASX: CXO) shares are down 85% and Syrah Resources Ltd (ASX: SYR) shares are down 70%.

The even better news is that one leading broker believes this ASX battery materials stock can rise significantly more over the next 12 months.

What is being said about this ASX battery materials stock?

Firstly, there was some big news this week that you need to know about.

That news was that Alpha HPA has received conditional approval for $320 million in project loan facilities and an $80 million cost overrun facility for Stage 2 of the HPA First Project.

These funds are from the Northern Australia Infrastructure Facility (NAIF) and Export Finance Australia (EFA), with support provided under the Australian Government’s $4 billion Critical Minerals Facility and EFA’s Commercial Account.

Commenting on the news, the ASX battery materials stock’s managing director, Rimas Kairaitis, commented:

We are delighted to receive extensive and attractive financing support from the Australian Government. This financing support represents a comprehensive endorsement of the Company’s technology and business strategy.

This key milestone brings Alpha one step closer to establishing Australia’s first, sovereign, large scale commercial capability to manufacture high purity aluminas and related products to support key high technology growth sectors driving the global energy transition. This support, combined with the deep and positive end-user engagement, consolidates our confidence in this unique business opportunity.

Broker response

In response to the funding, analysts at Bell Potter reaffirmed their speculative buy rating and lifted their price target on the company’s shares to $1.75.

Based on its current share price, this implies potential upside of approximately 60% for investors over the next 12 months.

Commenting on the funding news, the broker said:

The $320-400m in Government-backed concessional debt facilities are a major de- risking catalyst (we had assumed $300m) with extended tenor and what we expect to be a highly competitive cost of funds.

Looking ahead, Bell Potter believes the HPA First Project could deliver big profits in the future. It adds:

A4N’s high purity aluminium products have value adding applications across lithium ion battery, micro-LED and semiconductor manufacturing, technologies at the forefront of the global decarbonising and reshoring themes. We assume the HPA First Project Stage 2 is developed over 2024-25 for first production in 2026 and estimate EBITDA of over $250m at steady state at a HPAe price of US$25/kg.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.