Ilika (LSE:IKA) is a technology company developing solid-state battery technology to replace lithium-ion batteries. It sees its products helping a range of up-and-coming industries, including the industrial internet of things (IoT), medtech, electric vehicles (EV), and consumer electronics.
Lithium-ion batteries are in high demand for EVs and for advancing electrification around the world. But they’re not easily recycled due to the toxic liquid inside. Solid-state batteries should have a longer life span and be more easily recycled, hence their appeal.
They also have a higher power density, so they charge more rapidly, which is hugely appealing to consumers and businesses alike. The company sees a transition over the next decade in which solid-state batteries will gradually replace lithium-ion cell equivalents.
Ilika financials
Ilika is a small-cap stock with a £252m market cap. Its share price is down 36% from its 52-week high and up 275% from its 52-week low. Earnings per share are negative, but reassuringly, its debt levels are low.
Exciting uses
Ilika’s unique thin-film Stereax solution is helping it miniaturise its battery tech to fit medical products. This is for use in devices such as hearing aids. Even more futuristic are the nerve simulators that can replace the consumption of opioids. Plus, Stereax is used to power industrial wireless sensors in hostile environments.
Ilika has made a few notable connections in the past year. Such as teaming up with a Fiat subsidiary to help scale its Goliath battery programme.
As it stands, the company is producing a small volume of large-format solid-state technology from its pre-pilot production line. It intends to ramp this up by automating the facility over the next 18 months, at which point it will move into a battery industrialisation centre in Coventry. This facility has a framework agreement in place with the UK Battery Industrialisation Centre (UKBIC) to produce Goliath solid-state pouch cells.
Shareholder risks
It’s all undeniably interesting. But Ilika is a business-facing several risks that I think shareholders should keep in mind. It’s a competitive industry dependent on technological advancements and curbed by regulatory restrictions. It’s also reliant on partners commercialising its end-products.
Meanwhile, Ilika relies on a small number of significant customers and partners, and profitability is still a distant dream with a history of operating losses. Ilika previously raised funds via share placings, which may happen again. As a growth stock, it’s unlikely to consider paying dividends in the next few years either.
Will I buy shares in Ilika?
Ilika is very much an early-stage company with the potential to grow significantly if its vision for the future plays out. As it’s in the speculative stage, I’m not planning on adding Ilika shares to my Stocks and Shares ISA, but I’ll keep it on my watch list. It’s an exciting development area, and I think it could very well have considerable scope to grow.