first solar presentation
TRANSCRIPT
First Solar Stock Pitch | Fall 2016
Bulldog Student Investment Fund
Julian FungParker Neff
Michael Nimmer
Jonathan Rogers
Darren Tjung
Executive Summary
● Industry Leader
● Innovative Technology with Promising Pipeline
● Solid Balance Sheet
● Strong Growth Prospects beyond 2017
BUYCurrent Price:
$28.65Target Price: $33.74
Upside: 17.79%
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
Solar Industry Overview• Strong fundamentals across solar, approaching
LCOE with traditional industries
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.
Business Breakdown
Growth Drivers
• Utility-scale solar farms
• Technology efficiencies
• Low manufacturing costs
• United States policies
• Specific countries bolstering industry growth
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
Porter’s 5
Competitive Rivalry: High
New Entrants: Moderately Low
Buyer Power: High
Supplier Power: Moderately High
Threat of Substitutes: High
Portfolio Correlation
1 Year = -.3260
3 Year = -.0566
Valuation DCF
$30.0130%
P/SalesMultiple$35.3470%
● Discounted Cash Flow (30%):○ FCF to Firm○ FCF to Equity
● Multiples (70%): ○ Price/Sales
Target Price: $33.74
Discounted Cash FlowAssumptions: ● Growth rates
○ Y1 = -25%○ Y2 = -10%○ Y3 = 8%○ Y4 = 5%○ Y5 = 5%
● Terminal growth rate of 2%
DCF (30%): $30.01
Multiples
Assumptions: ● Sales of $2.9 Billion (2016)
● Sales of $2.6 Billion (2017 est.)
● Sales of $2.8 Billion (2019 est.)Multiples (70%): $35.34
Valuation DCF
$30.0130%
P/SalesMultiple$35.3470%
● Discounted Cash Flow (30%):○ FCF to Firm○ FCF to Equity
● Multiples (70%): ○ Price/Sales
Target Price: $33.74
Liquidation ValueCash and securities $2,126AR $569Inventory $450PV systems $487Projects assets $1,407JV investments $450Total liquid assets: $5,489Less debt: $787Net liquid assets: $4,702
Liquid value/share$45.21
Investment Thesis
• Cost leader in industry• Strong growth prospects in domestic
and international markets• Positioned well for industry
consolidation
Investment Risks• Uncertainty in systems to
components business transition • Lower than projected margins• Headwinds in international markets• Uncertainty in subsidies
Conclusion
● Industry Leader
● Innovative Technology with Promising Pipeline
● Solid Balance Sheet
● Strong Growth Prospects beyond 2017
BUYCurrent Price:
$28.65Target Price: $33.74
Upside: 17.79%