3. Solar Industry Overview
• Expected growth across various markets, with a
slight decline during 2017
• Trump presidency, Republican Congress may
provide challenges to clean energy markets
4. Solar Industry Overview
• Strong fundamentals across solar, approaching
LCOE with traditional industries
5. Solar Industry Overview
Conclusion: The solar industry has a bright
future due to decreasing costs and the
industry should thrive in the long-run
regardless of the political climate.
7. Growth Drivers
• Utility-scale solar farms
• Technology efficiencies
• Low manufacturing costs
• United States policies
• Specific countries bolstering industry growth
8.
9. SWOT
Strengths Weaknesses
● Industry leader
● Large R&D investments
● Unique thin-film technology
● Unsustainable project pipeline
● Brand portfolio
Opportunities Threats
● Increase in grid parity
● Yearly global solar installations
● Decrease in PV module prices
● Uncertainty regarding subsidies
● Inability to lower costs
● Silicon costs
10. Porter’s 5
Competitive Rivalry: High
New Entrants: Moderately Low
Buyer Power: High
Supplier Power: Moderately High
Threat of Substitutes: High
16. Liquidation Value
Cash and securities $2,126
AR $569
Inventory $450
PV systems $487
Projects assets $1,407
JV investments $450
Total liquid assets: $5,489
Less debt: $787
Net liquid assets: $4,702
Liquid value/share
$45.21
17. Investment Thesis
• Cost leader in industry
• Strong growth prospects in domestic
and international markets
• Positioned well for industry
consolidation
18. Investment Risks
• Uncertainty in systems to components
business transition
• Lower than projected margins
• Headwinds in international markets
• Uncertainty in subsidies
19. Conclusion
● Industry Leader
● Innovative Technology with Promising
Pipeline
● Solid Balance Sheet
● Strong Growth Prospects beyond 2017
BUY
Current Price:
$28.65
Target Price:
$33.74
Upside:
17.79%
Editor's Notes
FSLR has a 1 year correlation of -.326 and a 3 year correlation of -.0566.
These are very low numbers and would be a great fit for our portfolio as it would provide diversification benefits and minimize our overall unsystematic risk
For DCF, we used a rF rate of … E(Rm) of 4.89%, a tax rate of.. and came up with a WACC of 8.48%
Since there is an expected drop in solar growth next year, we used a fluctuating growth rates of ….and terminal growth rate of 2%
With this we arrived at a DCF valuation of 36.49 which we gave a 25% weighting
As we can see across competitors, FSLR has by far the best numbers - highest margin, lowest D/E, and low P/E.
P/S is skewed because they heavily missed earnings but this does not change their overall thesis
Sales estimates for year 2016 has been lowered by 27% from 4bil to 2.9bil. We believe that a lot of the drop in solar demand next year has already been reflected in this year’s estimate
Thus, we use very conservative estimate of sales of 4 billion by 2019, where the Solar industry is expected to recover from next year’s dip and break way past it
Our thesis is three-fold:
Cost leader in industry and have a unique technology with promising pipeline.
They invest in R&D more than any of their competitors, and recently surpassed Trina Solar as lowest cost provider, and we believe that FSLR’s technology has a much more sustainable roadmap than competitors.
Second, strong growth prospects in domestic and international markets
Thanks to competitive pricing compared to other energy sources, solar industry as a whole is poised for long-term growth
FSLR plans to increase international market share to 20% from 15%, this will be achieved by aggressive growth plans in India and Middle east, as they aim to become leading provider in middle east by 2017.
Lastly, positioned well for industry consolidation
Industry is ripe for a shakeout, and FSLR is prepared to survive an uncertain 2017 and thrive beyond it.
