Canaccord Genuity’s John Quealy believes that amid the rapid wind market growth and ongoing OEM productivity shift toward outsourcing, the recent IPO of TPI Composites Inc TPIC “is helping to fund capex for expansions and new builds.”
Quealy initiated coverage of the company with a Buy rating and price target of $20.
Growth Expectations
“The company has an established track record of credibility with OEMs, with proven expertise in composite technologies and precision molding/assembly,” the analyst mentioned, while adding that regulatory drivers and LCOE trends were likely to drive continued growth.
Quealy believes TPI Composites’ revenues are being supported by its long term supply agreements, with customers incentivized to maximize pricing through pricing.
Sales CAGR
The company has been witnessing sales CAGR of 65 percent over the past three years, with four new wind blade manufacturing facilities being added during 2013–2015 and several ongoing expansions during 2016/2017.
The analyst explained, however, that new plants “generate losses during their first ~12–24 months as they operate far below capacity during pre-production and ramp-up phases.”
In addition, blade model transitions were also likely to lead to temporary fixed overhead under-absorption.
Strong Management
According to the Canaccord Genuity report, “TPI is led by a team of experienced manufacturing technology veterans (including its long-term veteran CEO) with a proven track record of managing flexible international operations.”
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