Valuing Duratec Limited (ASX:DUR) through DCF and Comparable Analysis: Assessing Growth in the Battery Recycling Sector

Assessing Growth Potential in the Battery Recycling Sector

The battery recycling industry is poised for transformative growth, driven by the rapid adoption of electric vehicles (EVs) and global sustainability mandates. According to a Coherent Market Insights report, the global battery recycling market is projected to expand at a compound annual growth rate (CAGR) of 11.46% from 2025 to 2030, reaching USD 33.22 billion by 2030. This surge is underpinned by the dominance of lithium-ion batteries, which accounted for 39.7% of the market share in 2025, and the transportation sector's demand for battery replacement and recycling, as noted in a Finerva valuation report. Asia-Pacific, with its stringent e-waste regulations and EV infrastructure, is expected to lead the market, holding 42.0% of the regional share.

For investors, Duratec Limited (ASX:DUR) emerges as a key player in this evolving landscape. However, its valuation requires a nuanced analysis of both discounted cash flow (DCF) modeling and comparable company metrics to assess its alignment with sector dynamics.

DCF Analysis: Discount Rates and Growth Assumptions

Duratec's DCF valuation hinges on its weighted average cost of capital (WACC) of 7.72%, derived from a cost of equity of 7.52% (via CAPM) and a cost of debt of 11.81%, according to AlphaSpread's WACC page. This WACC reflects the company's risk profile, with a beta of 0.78 indicating lower volatility than the market, as shown on AlphaSpread. For growth assumptions, GuruFocus projects a 9.2% average annual revenue growth over the next three years, a figure cited in Duratec's FY25 earnings coverage. However, the terminal growth rate of 4%-consistent with long-term inflation-introduces sensitivity to macroeconomic shifts, a point discussed in a Wisesheets post.

Duratec's financials for FY25 show revenue of AU$573.0 million, a 3.1% increase from FY24, with a net income of AU$22.8 million and a margin of 4.0% (see Duratec's FY25 earnings coverage). While EBITDA for the past 12 months is reported at AUD 37.14 million, according to StockAnalysis statistics, capital expenditures of -14.05 million AUD suggest operational cash flow challenges. These metrics, combined with the WACC, yield a DCF valuation that must be tempered by the company's recent earnings shortfall (missing revenue and EPS expectations by 1.9% and 9.0%, respectively, as reported in Duratec's FY25 earnings coverage).

Comparable Analysis: Sector Multiples and Competitor Benchmarks

The battery recycling sector's valuation multiples provide critical context. As of Q4 2024, the median EV/EBITDA for Green Energy companies was 5.7x, while the sector-wide average for Materials firms stood at 14.03x, per the Finerva report. Duratec's peers, however, exhibit divergent metrics:
- Umicore (Belgium): EV/EBITDA of 7.11x and P/E of 14.9x, according to MarketScreener's valuation page, reflecting operational efficiency despite sector volatility.
- Li-Cycle (Canada): EV/EBITDA of -3.30x (due to losses) and a near-zero P/E, per MarketScreener's valuation page for Li-Cycle, highlighting unprofitability.
- Ecobat (UK): No specific multiples available, but sector trends suggest a range of 5.7x–14.03x.

These disparities underscore the sector's fragmentation. Umicore's robust EBITDA margin of 24.3%, noted in the Umicore half-year results, contrasts with Li-Cycle's struggles, illustrating the importance of operational differentiation. For Duratec, a DCF-derived intrinsic value must be cross-checked against these multiples to avoid overvaluation.

Investment Thesis: Balancing Growth and Risk

Duratec's position in the battery recycling sector is promising but not without risks. The company's 9.2% revenue growth forecast aligns with the industry's CAGR of 8.5–11.46%, supported by its focus on lithium-ion recycling and strategic partnerships. However, its recent earnings misses and negative capital expenditures raise concerns about scalability.

From a valuation perspective, Duratec's DCF model suggests a fair value range, but the absence of clear EV/EBITDA and P/E benchmarks for direct competitors like Ecobat complicates comparisons. Investors should prioritize Umicore's 7.11x EV/EBITDA as a conservative benchmark while monitoring Li-Cycle's turnaround potential.

Conclusion

The battery recycling sector's growth trajectory offers a compelling backdrop for Duratec, but its valuation requires a dual lens: DCF modeling to quantify intrinsic value and comparable analysis to contextualize sector positioning. While Duratec's WACC and growth assumptions are favorable, its operational metrics and competitor multiples highlight the need for cautious optimism. For investors, the key lies in balancing the sector's long-term potential with Duratec's near-term execution risks.