Zacks upgrades SunSi to Outperform - Analyst Blog

Steven Ralston, CFA

Zacks upgrades SunSi to Outperform

SunSi Energies (SSIE) reached a milestone with the announcement that the company's financial commitments for the acquisition of 60% of Wendeng trichlorosilane facility having been completed. We are now more confident on the expected revenue stream for SunSi going forward, along with the financial flexibility afforded SunSi to pursue the strategy of acquiring additional trichlorosilane capacity. SunSi is the only US publicly traded company to solely focus on the production of trichlorosilane, primarily for the solar industry. As such, the company is positioned to benefit from the growth of the solar energy industry, specifically the increasing demand for solar-grade polysilicon. As a result of the transaction being economically completed, we are increasing our target to $4.00 and upgrading the stock rating to Outperform.

The company announced that the required $445,075 cash payment was made ahead of schedule to the 40% shareholder of Wendeng, who also waived his right of redemption at $2 per share and elected to retain 1,349,628 shares of SunSi common stock, converting $2.7 million of redeemable stock into stockholders equity on SunSi's balance sheet. The purchase price for the 60% equity interest in Wendeng is now fully paid.

Management has aggressively, but with the appropriate due diligence, completed two acquisitions (Wendeng and Baokai), and is pursuing others, along with increasing the capacity at Wendeng by 240% to 75,000 metric tons of trichlorosilane. Having completed the financing of the Wendeng transaction without the need to raise additional capital, the company better positioned to achieve its business strategy of the acquisition, development and operation of trichlorosilane production facilities in China in order to serve the growing requirements of the solar photovoltaic industry worldwide. Therefore, we have raised our rating to Outperform with a price target of $4.00.

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