first solar presentation
TRANSCRIPT
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First Solar Stock Pitch | Fall 2016
Bulldog Student Investment Fund
Julian FungParker Neff
Michael Nimmer
Jonathan Rogers
Darren Tjung
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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%
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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
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Solar Industry Overview• Strong fundamentals across solar, approaching
LCOE with traditional industries
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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.
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Business Breakdown
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Growth Drivers
• Utility-scale solar farms
• Technology efficiencies
• Low manufacturing costs
• United States policies
• Specific countries bolstering industry growth
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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
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Porter’s 5
Competitive Rivalry: High
New Entrants: Moderately Low
Buyer Power: High
Supplier Power: Moderately High
Threat of Substitutes: High
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Portfolio Correlation
1 Year = -.3260
3 Year = -.0566
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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
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Discounted Cash FlowAssumptions: ● Growth rates
○ Y1 = -25%○ Y2 = -10%○ Y3 = 8%○ Y4 = 5%○ Y5 = 5%
● Terminal growth rate of 2%
DCF (30%): $30.01
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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
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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
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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
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Investment Thesis
• Cost leader in industry• Strong growth prospects in domestic
and international markets• Positioned well for industry
consolidation
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Investment Risks• Uncertainty in systems to
components business transition • Lower than projected margins• Headwinds in international markets• Uncertainty in subsidies
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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%