Deutsche Bank Comments On A123 Systems Following In-Line Earnings Report

A123 Systems AONE reported EPS of -0.51 vs DBe of -$0.50, on rev of $18.1MM. The company reiterated its 1Q11 revenue guidance of “sequential doubling vs Q1” and its FY2011 of $210MM-$225MM. Deutsche Bank continues to expect 100%+ revenue growth in 2012 and 2013 based on current customer contracts. Mgmt reiterated that cash levels are sufficient to reach Adjusted EBITDA break-even. Deutsche Bank continues to expect AONE to garner 8%-9% of the automotive lithium-ion market and maintains a Buy rating and $12 PT. Deutsche Bank believes that AONE's tangible book value is under-stated on its balance sheet, due to the fact that the value of capital equipment purchased with DOE Grant funds stays off-balance sheet until it is depreciated. If the true value of PP&E is used, credit AONE with only the current cash that is intended to be used for Capex through 2012, add its remaining DOE Grant balance which will be used for PP&E, and offset with 2012YE estimated debt of $181MM, DB calculates $512MM of tangible book value. Deutsche Bank continues to believe that an investment in AONE, although relatively speculative, is a compelling way to take advantage of the growth in vehicle electrification, as well as the use of lithium-ion batteries to enhance electric grid performance. AONE is trading lower at $5.85