The Tirupati Graphite (LSE: TGR) share price is up almost 22% today as I write. I’ll confess I’d never heard of the company until this morning when The Daily Telegraph reported that its new material could be revolutionary. Like seriously game changing.
What’s happening at Tirupati Graphite?
It was reported that the graphene producer has had success in creating a graphene-aluminium composite material. It could replace copper wires in planes. The new material could replace copper wiring because it’s lighter than copper. It can also be manufactured at scale. And airlines should be on board because lighter aircraft are cheaper to run.
Rolls-Royce has told the media that it has had preliminary discussions with Tirupati Graphite. That has helped add credibility to the potential of the company.
Could the share price go higher?
I think the shares could go higher, primarily because the increased awareness has put this little-known company on many more investors’ radars now. That could drive demand for the shares. If it makes progress, then there’s plenty of room to grow from a market capitalisation of only £92m.
The company has support from successful fund manager Gervais Williams of Premier Miton. He is quoted as saying that the mining activities of Tirupati Graphite alone support the valuation. That indicates that, in his view, the share price could go higher.
If in the coming weeks the company can update on any other preliminary discussions with firms in the aerospace sector, that could give the Tirupati Graphite share price a major boost.
What are the risks?
There’s quite a bit of risk with this share, of course. First, there’s an immediate risk that a 19% share price rise in one day, based on one media article, is too much of a rise in such a short space of time.
More fundamentally, Tirupati operates in Madagascar and India. Operating so far from the UK and in potentially a very different business environment adds some more risk, I feel.
I’d think Tirupati also has high costs because it’s a fully integrated graphite and graphene producer with primary mining and processing facilities. That has advantages in terms of controlling all the processes from mining raw materials to selling the graphite at the end. On the other hand, it adds complexity and cost to the business as well.
There’s also some way to go before the flake graphite it produces is widely adopted and used. It’s not a case of this announcement meaning there will be a guaranteed flood of orders.
Lastly, the company has only just listed on the UK stock exchange, which always adds some risk. We’ve seen other IPOs do badly. That said, others have done well so it’s not a given that this is a risk.
Overall, while this news is undoubtedly exciting, I’ll be avoiding Tirupati Graphite shares for now. It strikes me as still a very speculative stock. When it comes to mining, I much prefer the look of Sylvania Platinum, which I’m likely to add to my portfolio soon.
