Talga Group's (ASX:TLG) new non-binding letter of intent (LOI) with Dainen Materials is another "encouraging" step for the company, providing a potential customer pathway into Japan, Euroz Hartleys said in a Thursday note.

The company recently signed the LOI with the Japan-based firm for the supply of its battery anode material, Talnode-C, from the Vittangi project in Sweden.

The LOI establishes a pathway toward a binding offtake agreement by this year, with the parties expecting a binding term sheet in September.

Dainen, which supplies anode active materials to Japanese automotive, energy storage, and electronics makers, has been working with the company for over five years, and their continued progression is deemed a "positive read-through" for the quality of Talnode-C, according to Euroz Hartleys.

Converting the LOI into a binding agreement would help secure the funding pathway for the Sweden project and could support a re-rate of the stock, the financial services firm said.

Euroz Hartleys maintained its speculative buy recommendation and AU$1.33 price target on Talga Group.

Talga shares fell 6% in midday trade on Friday.