Raymond James rates Origin Materials at ‘market perform’: cites ‘limitless market’ but looming technology validation

July 24, 2021 |

In New York, investment advisors Raymond James initiated coverage of Origin Materials with a Market Perform rating. Renowned sector analyst Pavel Molchanov wrote that “PET resin alone is a $145 billion market, and penetration of bio-based plastics is sub-1%…bio-based plastics are an important means of decarbonizing the chemical industry. With producers as well as consumers clamoring for green options, the addressable market is practically limitless.”

Molchanov cautioned “scaling up production of bioplastics is easier said than done: the operational hurdles are substantial. Origin Materials, Inc. is one of many pre-commercial players pursuing this opportunity, with the first plant expected to start up at the end of 2022. Bearing in mind the history of operational disappointments in the space, we think that caution is warranted until the technology platform can be successfully validated. 

“Will Origin succeed? We will find out in 2023. Many bioplastic startups have tried to scale up, but commercialization has proved elusive – for operational reasons rather than a lack of demand. The question for Origin (and its investors) is: how will its technology platform fare? The platform is based on chemical catalysis and is easier to scale than the synthetic biology processes of many other players – but it is still fundamentally unproven. The first large-scale production facility, Origin 1, is being built in Ontario, with startup expected at the end of 2022. The first half of 2023 will be the crucial timeframe for gauging whether operational performance is matching up with pre-startup expectations. 

“Even assuming that Origin 1 will perform as expected, its modest scale translates to a negative cash margin. Subsequent plants, with at least 10x the capacity, have yet to be sited, but the expected startup dates are 2025 for Origin 2 and 2027 for Origin 3. With partial utilization of Origin 2, we anticipate that EBITDA will enter positive territory in 2025,

“Given the post-SPAC cash balance of around $500 million, Origin 1 is fully funded, along with operating cash burn, but substantial project financing for Origin 2 will need to be obtained.”

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Category: Chemicals & Materials

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