Origin Materials downgraded to Hold at Craig-Hallum after Origin 2 ‘curveball’

Craig-Hallum downgraded Origin Materials to Hold from Buy with a price target of $2, down from $12, following the company’s Q2 report. While Origin started up its Origin 1 plant in Ontario in Q2, reiterated FY23 guidance, and reported that customer demand now stands at over $10B-plus from an expanding set of customers “this all takes a back seat to the major curveball served up” as the company reported its decision to shift planned Origin 2 production to focus on FDCA – a renewable substitute used in the production of polyester – from paraxylene to capture expected higher margins, the analyst tells investors. While this is being done in response to strong demand for FDCA, the firm sees this as “a big bet on FDCA” that it doesn’t see coming without risks, in addition to the startup of Origin 2 being pushed back from 2025 to Phase 1 completion in late-2026 and 2027, the analyst added.