CENTROSOLAR “accumulate”

04/02/07 - AC Research

LONDON, April 2 (newratings.com) – Analyst Sven Krupp of AC Research reiterates his "accumulate" rating on CENTROSOLAR (C3O).

According to AC Research’s research note date March 30 and published this morning, the company has reported its 2006 results. CENTROSOLAR had already declared its provisional 2006 results in January, and the unexpected weak results of the 2006 final quarter had the company clearly miss its own target.

Total sales were up from €15.1 million in 2005 to €172.2 million last year, with an organic growth rate of 49%, which was higher than the market average. International business saw a rather positive development, contributing 29% to overall sales. EBITDA (adjusted by non-recurring expenses from the IPO in the amount of €0.6 million) reached €9.8 million, representing a 5.7% sales return. The company reported its EPS at €0.12. The result was burdened by some rather elevated asset depreciations that were newly activated or enhanced in the scope of company takeovers according to IFRS 3. Not considering the after-tax effect from the depreciations according to IFRS 3 (€6.1 million) and non-recurring expenses from the IPO, "cash EPS" reaches €0.61.

For 2007 the management projects sales of at least €220 million (at least +27% over last year’s results) and an EBITDA of approximately €17 million (up 70% from last year). The analyst believes that CENTROSOLAR should reach these targets without any problems. Following the latest failure at reaching the forecasts, the guidance has deliberately been kept rather low, the analyst says.

Currently, the solar technology market enjoys some rather high growth rates. Global discussions about climate change cause more and more countries to increasingly look for regenerative energies. An end to this boom is currently not in sight, AC Research adds. Against this backdrop, the analyst welcomes CENTROSOLAR’s rapidly progressing efforts at internationalization. Recently the company opened new branch offices in Spain, Greece, France, and the US. Considering its technical knowhow, CENTROSOLAR should not take long to win its first contracts, AC Research mentions.

By missing the forecasts early this year, the company lost some investor confidence. But with Thursday’s closing price of €10.85 and an estimated sales multiplier of roughly 0.7 for 2007, the company’s stock seems to enjoy a rather attractive rating. From 2008, results should improve considerably, so that a 2008 P/E ratio of about 19 should not seem too ambitious in comparison with the overall industry. Towards the end of last year CENTROSOLAR’s capital basis reached €73.5 million, providing the corporation with a 49% captial ratio and thus a rather favourable position in the market. The current price level already reflects a good deal of pessimism, so the analyst views more chances than risks for an investment in the company’s stock, considering the rather promising business prospects.

AC Research reiterates its "accumulate" rating on CENTROSOLAR.