American Superconductor Rises on Renewable Energy Deal

Shares of American Superconductor (AMSC), which makes cabling and other high-temperature superconductor-based parts used in wind power installations, is up $7, or 19.6%, at $43.17, today after announcing a $450 million deal to supply China’s Sinovel Wind Corp. wind turbine company.

In a note to clients, Needham & Co. analyst James Ricchiuti writes that the deal adds to AmSuper’s “already formidable” backlog of $200 million in orders as of the end of March. The deal was much larger than expected, Ricchiuti observes, but with the stock now trading at 7 times enterprise value as a multiple of projected sales, he maintains a “Hold” rating on the stock.

Mind you, AmSuper has “substantial room for growth” over the next several years, with the 10 gigawatts of capacity represented by the order being “just a small percentage” of China’s power needs. China is expected to have “power capacity” of 120 gigawatts by 2020, Ricchiuti thinks. Ricchiuti is raising his revenue estimate for AmSuper to $176 million this year from $171 million, and for next year, to $254 million from $223 million, and trimming his loss-per-share estimate for the firm from 22 cents to 21 cents this year, and raising next year’s profit estimate to 23 cents from 2 cents — quite a jump.

AmSuper can expect subsequent business from wind turbine manufacturers in China such as ZELRI, Dongfang, TECO Electric & Machinery in Taiwan, and with Ghodowat Industries of India, he projects.

Comments

[daveborn:]

In the most recent CC, Yurek stated that the Average Sales Price (ASP) of AMSC's core electrical components for a 1.5 mW wind turbine is $50,000.

The math equates the $450 million order from Sinovel being for 9,000 1.5 mW wind turbines (through Dec. 2011).

Based on past PRs, it appears that Sinovel will be capable of producing no more than 2500 or so 1.5 mW turbines through 2010.

What am I missing here - Sinovel ramping production much faster than publicly announced? Planning on somehow manufacturing 6000+ turbines in 2011? Two-thrids of Sinovel's 1.5 mW orders outside of AMSC? ASP higher for Sinovel? The order is for more than just the 1.5 mW version?

Any input would be greatly appreciated! Thanks. - Dave Born

2008 Jun 11 10:25 AM

[borisb:]

good post for being alert and right on it. i added my opinion to the new post on wednesday. also "what might be missing" is that there are 8 licencees going on 10+ licencees. Yes some are small fry but some are huge. The one in India and the westinghouse in Taiwan might do high volumes. Heck many might do high volumes. Its one of the most profitable manufacutring product lines out there and all these manufactures would like in on the Bonaza.

2008 Jun 11 02:20 PM