GT Solar is a solar equipment manufacturer and service provider. The company
has two main products, and a business unit built around each of them. The Photovoltaic business (76% of fiscal 2009 revenues) makes and sells direct solidification systems, or DSS units. A DSS unit is a furnace specifically designed to melt silicon to produce the ingots used to produce wafers on which solar cells can be constructed. The sale of these units alone accounted for 2/3rds of revenue over the past 12 months. The Polysilicon business (24%) makes and cells chemical vapor deposition, or CVD, reactors. CVD reactors are used to manufacture polysilicon, the raw material needed for solar panel and semiconductor construction. GT Solar collects the vast majority of sales (91%) from customers in Asia, including China.
The company was IPO'd last July at a price of $16.50... way above its current stock price of about $6 a share.
Mostly, everyone realizes the growth potential in solar. 2008's soaring gas and energy prices ignited yet another push for renewable and sustainable energy sources, and new President Obama has made renewable energy credits a prime feature of his stimulus and budget plans. The overall solar market had been growing at a 35% annual pace before last fall's market meltdown, and an even faster 60% pace in the United States (although from a small base). GT Solar has fully benefited from this, growing revenues 122% last year and 306% in 2007! Although revenue forecast is slightly down for 2010 due to economic weakness and difficult credit, an improvement in economic conditions could lead to resumed growth in this exciting market.
GT entered the CVD business in 2007 in response to the worldwide shortage of polysilicon. Historically, a small number of wafer makers (including MFI stock MEMC Electronic Materials, ticker WFR) controlled the market for silicon, with rather high barriers to entry due to a dearth of available equipment for entering the business. GT Solar looked to stimulate the entry market by providing CVD reactors, a key piece of equipment, in turn creating competition to lower the prices for silicon, which comes full circle to stimulate solar demand due to lower prices (in turn juicing demand for DSS units).
Given this kind of growth potential, GT Solar is priced quite low at a 17% earnings yield. Weak customer demand due to credit constraints and and high prices (solar is very expensive and more difficult to justify in a difficult times) has led to a 2010 revenue guidance of 8% lower than 2009. However, the forward earnings yield is still 11% - a nice number given the longer term growth prospects here. Also, GT Solar is financially sound. The balance sheet shows $107 million in cash vs. no debt.
