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*conservative
Having real issue with fat fingers this morning.
Martyh. Thanks for the clarification.
If with the concervative estimate it is still compelling.
The JDP with Paragraf has not even priced in ny potential, but it is better this way.
My understanding is that the increase to 55MW would come primarily from just increasing the shift numbers so that the Italian factory operates around the clock.
Therefore it should be a fairly quick process to increase the capacity, without much capex needed.
Agreed that the overheads could be spread. I was working on the basis that the £6m EBIT number was broadly made up of £8m of gross profit on panel sales less £2m of overheads.
At 55WM the gross profit becomes £22m, leaving £20m EBIT after the £2m overheads are deducted.
I don't think the £2m overheads will increase much. All of the additional variable costs (materials, staff costs etc) would be included in Cost of Sales in arriving at the gross profit.
Using a 1.25 Euro/Watt price changes the £20m EBIT to £30m EBIT.
Is 55Mw what is possible for the Italian factory.
Also worth considering, where production is in one location there will be economy of scale and therefore profitability for the additional capacity will or may increase slightly as overheads are shared across the increased capacity.
There will be a requirement for more production staff etc but general overheads such as management expenses and admin would not raise by the same factor.
Martyh, why would you spend the fundraise capital on increasing capacity to 55Mw if you didn't intend to fill the 20Mw in the first place. Hence the reason RR is also looking for licencing due to the material size order received from Endeco.
Successful IM Efficiency trials would present a 20Mw opportunity. Verditek would need the additional capacity to service other customer requirements.
Do you know how long the factory took initially for the 20Mw line ? Wondered how long before they have the new line operating ?
What is potential for 55Mw in house capacity ? I expect it dwarfs the current £30m MCap.
As PH has stated. The 20Mw based on the low selling price would generate £6m before EBIT. Net profit is likely to approx £4m. This would be multiplied by 3 for the increase capacity so £12m. Although likely higher due to economy of scale.
With a P/E of 14 we have an MCap of £168m and an SP of 57p. Although this may be concervative if a higher selling price is achieved, further lines are licenced in strategic locations and significant economies of scale are seen from up sizing capacity.
I’ve been looking again at the potential profits next year.
At 20WM and the base price of 1 Euro/Watt we’ve been told they will make £6m EBIT.
I continue to think the average selling price will be quite a bit higher than 1 Euro/Watt.
The Michael Walters articles are very informative, I think he is clearly speaking with the company. Michael highlights that the company has the opportunities for selling some product at Euro 1.5 or more per watt. The latest order RNS spoke about the first order into the ‘very profitable’ marine market and another company in the marine sector, Solbian, is selling their panels at 5.60-9.90 Euro/Watt.
Using 1.25 Euro/Watt give about £10m EBIT vs a market cap of £30m. As more orders are announced I think the market will begin to price in the 20MW factory being full, at which point a £100m market cap wouldn’t be unreasonable (34p a share).
That’s just at 20MW before production expansion to 55MW from the current factory.