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Norsk Titanium (Oslo listed: NTI) is a US based and Norway listed company which has developed a proprietary disruptive technology which can produce titanium-parts for about 55-70% lower cost than incumbents.
The first plant is built in the US and is now certified by Airbus and others. The company is already producing for Airbus, ASML (the largest producer of chip making machines) and others.
Airbus is now certifying the plant for production of safety critical aircraft parts, where margins are very strong. The company in its presentation (see below) indicated the first Airbus critical parts order is expected in 2Q23. The order would serve as a proof for investors. When received, the share price should react very strongly.
The company raised around 10 mln USD recently and should be well funded until the Airbus certification.
Note from Carnegie analysts
Norsk Titanium
- Invested: $400m
- Mcap: $90m
- Debt: zero
- Cash: $5m
- Burn: $1,8m/month
- Cash need to fully funded: $50m
Norsk Titanium is an innovative Norwegian company which has developed a proprietary disruptive technology which can produce titanium-parts for about 55-70% lower cost than incumbents.
Norsk Titanium was started in 2007, one of the founders was Alf Bjørseth (REC, Scatec Solar).
From its start and up until today around USD340m has been invested in the company. Norsk Titanium has received USD125mill in grants from the NY state, which has financed both all their machines and the production facility, which is the largest 3D printing facility in the world.
Norsk Titanium is not 'another metal 3D printing company'. NT's technology called Rapid Plasma Deposition(RPD), uses a plasma torch to melt a titanium wire and thus builds the products 'drop-by-drop'. This is different to traditional 3D metal printing, which basically is ordinary printing done over and over and over again. Norsk Titanium's products have 100% 'forging-quality' (extremely important, since they will produce critical structural parts), while 3D metal printing have not. Thus Norsk Titanium will not be in competition with the 3D metal printing companies.
Titanium is a metal that is extremely suitable for 'high-value applications' since it is strong and relative light. It is a life-or-death' metal within the aerospace industry and has bean around in that industry at lease since 1950.Norsk Titanium has until now used their resources in R&D and run numerous testing and qualification programs and is the only 3D (or more precisely Additive Manufacturing) company that has been qualified by FAA (Federal Aviation Association) for production of structural titanium parts for the commercial aircrafts. Structural parts are typically parts that carries weight – that part that ties the engines to the wing, parts that tie the different airwing sections to each other and also tie the wings to the body of the aircraft. Unsurprisingly there are long and extensive quality and qualification prosesses ahead of any serial orders.
The total addressable market (TAM) for NT's titanium parts is around USD150bn with the aerospace around 13bn – that is based on the final product. Since Norsk Titanium produce 'near-shape parts', the relevant numbers for Norsk Titanium is half of the TAM.
Since an ever increasing share of the aircraft is composite materials, the share of titanium will almost automatically also increase since titanium does nor corrodes with composites (which other materials may do). The current aircrafts fleet contains around 7% titanium on average, while Dreamliner (which use a lot of composites) for instance contains 15% titanium
Norsk Titanium's competitors are the traditional forging companies (the incumbents) – ATI, Howmet (both listed), Albert & Duval and Otto Fuchs to name a few.
In general titanium metal is expensive. When producing a final product the incumbents use around 12x as much titanium metal than the end product. Similar numbers for Norsk Titanium is around 3-4x. This is the lower(dark) section in the chart below. In order to produce a finished product, the incumbents need to heat the metal, forge, press, use a die to form it, press it again, forge, press, use another die, forge, press, etc etc. This process is typically repeated 7-10 times and equals the machining cost in the chart. As you see this cost is typically far higher than the pure raw material cost. Norsk Titanium costs to create the product is more or less the same as its raw material cost. This is the light color (the RPD cost) in the middle of the Norsk Titanium bar. After production, Norsk Titanium sells its 'near-shape product' to its customer which further shaves off excess metal and process it further. That machining cost is shown on top of the Norsk Titanium bar. I stress that this cost is not a cost for Norsk Titanium, but I stack all costs in the RPD process to compare overall costs between a typical incumbent and costs based on Norsk Titanium technology.
Norsk Titanium's business idea is to sell their products to its customers equal to incumbents RAW MATERIAL COSTS. Since the titanium cost per aircraft is high – and increasing – Boeing and Airbus are screaming for lower titanium costs. With Norsk Titanium's disruptive technology, costs can be reduces by 55-70%. By switching to Norsk Titanium, both its customers and the end customer will save costs and thus improve profitability. The end game is probably that the major share of the structural parts in the titanium market somewhere in the future is made from similar (right now Norsk Titanium is the only player) technology.
Disclosure:
The goal of the blog is to provide investment ideas for further research. I/we have a beneficial position in the shares discussed above either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. The article does not represent investment advice. Please do your own research before making any investment action.
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