Alt-Energy: Unsexy Batteries, Sexy Forecast (JCI, XIDE, MXWL, FLEX)

When (if) a conversation ever turns to battery technology, most folks’ eyes glaze over and they begin to think about their next vacation. Maybe that should change.  Johnson Controls, Inc. (NYSE: JCI), maker of 36% of the world’s supply of lead-acid batteries, has seen its share price rise by nearly 50% in the past year and competitor Exide Technologies (NASDAQ: XIDE) has watched its share price appreciate by more than 40%. And provided the companies can execute, there more growth on the horizon.

Johnson announced on Monday that it would spend $138.5 million to convert a plant from the manufacture of standard absorbent glass mat (AGM) batteries to the manufacture of start-stop batteries. Johnson said that the global market for start-stop batteries will grow to 35 million units by 2015, up from about 6 million today. By 2020, Johnson expects to see a global market of around 95 million units.

Start-stop technology turns off a car’s engine whenever the car stops and then automatically restarts the car when the driver lets up on the brakes. Standard AGM batteries can’t handle the number of cycles or the accessory load demands of start-stop technology. A vehicle equipped with the technology could cut CO2 emissions and fuel consumption by 5%-12%.

Johnson raised its fiscal 2011 guidance to $38.5 billion in revenues back in January, and then raised guidance again to $39.5 billion in April. That includes a projected hit to revenues of $500 million due to disruption to Japanese automakers as a result of the earthquake and tsunami.

While the company’s price/book ratio is a fairly high 2.48, Johnson’s trailing P/E is 17.48 and its forward P/E is 12.46. The median stock price target is $48/share, and at mid-day shares are trading up about 1.5%, at $40.77, within a 52-week range of $26.07-$42.53.

Johnson seems solidly committed to the start-stop market, and Exide is gearing up as well. Exide projects a start-stop market of about 25 million units globally in 2015. Exide’s trailing P/E is 22.79, while its forward P/E is just 6.43. The company’s price/book ratio is just 1.42 and the median price target is $12/share. The company’s shares are up about 0.7% around noon today, at $7.48, within a 12-month range of $4.12-$12.68.

Another competitor in the start-stop space is Maxwell Technologies Inc. (NASDAQ: MXWL), makers of a device known as an ultracapacitor. Earlier this year Maxwell signed a deal with Flextronics International Ltd. (NASDAQ: FLEX) to include Maxwell’s ultracapacitors in Flextronics-designed systems. Maxwell is, perhaps, overvalued, with a negative trailing P/E, a forward P/E of 25.22 and a price/book ratio of 4.41. The company’s median price target is $21/share, about $1.50 above the top of Maxwell’s 52-week range.

Paul Ausick