2010_01Jan_21_Centrosolar Margin Pressure (Goldman)

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1、January21,2010Centrosolar(C3OG.DE)January21,2010ACTIONSellCentrosolar(C3OG.DE)ReturnPotential:(22%)Marginpressureandsubsidyuncertainty:DowngradetoSellSourceofopportunityInvestmentProfileWebelievethemarketunderestimatesthedownsideriskstoearningsforLowHighGrowthGrowthCentrosolar,amoduleandco

2、mponentmanufacturerfocusedonroof-topReturns*Returns*installationsinEurope.Twoofitsmainmarkets,GermanyandFrance,MultipleMultiplehaverecentlyproposedsignificantchangestotheirsolarsubsidies,whichVolatilityVolatilitycouldhaveamaterialimpactonthecompany’searnings.ThisreinforcesPercentile20th40t

3、h60th80th100thCentrosolar(C3OG.DE)ouralreadycautiousstanceonalltheEuropeanbasedmanufacturingEuropeRenewableEnergyPeerGroupAveragecompaniesowingtoconcernsregardingoversupply,competitionfromlow*Returns=ReturnonCapitalForacompletedescriptionoftheinvestmentprofilemeasurespleaserefertocostregio

4、nsandpricingpressure.With22%potentialdownsidetoourthedisclosuresectionofthisdocument.pricetarget,wedowngradethestockfromNeutraltoSell.KeydataCurrentCatalystPrice(€)4.37Webelievethatpricingandmarginpressurein2010causedbyindustry12monthpricetarget(€)3.40Upside/(downside)(%)(22)oversupply,com

5、binedwithanyeffectsofamid-yearcuttoGermansolarMarketcap(€mn)88.8Enterprisevalue(€mn)157.8tariffs,willactasanegativecatalystforthestock.Ourscenarioanalysisofa10%cuttoGermantariffsinApril2010couldleadtoan18%EBIT12/0812/09E12/10E12/11ERevenue(€mn)332.6283.1335.3384.9reductionin2010Eacrossthed

6、ownstreamsector.Wearecurrently5%EBIT(€mn)12.02.012.916.1EPS(€)0.72(0.14)0.220.30belowBloombergconsensusestimatesfor2010salesand15%belowforEV/EBITDA(X)8.227.313.111.7EBITandbelieveanenvironmentofearningsdowngradeswouldputP/E(X)9.7NM20.014.8Dividendyield(%)0.00.00.00.0pressureonsharepriceper

7、formance.FCFyield(%)(27.8)(31.4)(26.2)(30.4)CROCI(%)8.94.46.56.8CROCI/WACC(X)--------ValuationEV/GCI(X)1.00.90.90.9Ourunchanged12-monthtargetpriceof€3.4isderivedfromasectorPriceperformancechartaverage0.6xEV/GCImultipleon2010E,sense-checkedwithEV/EBITand5.0340E