GT Solar an Acquisition Target After Raising Forecasts

GT Solar International Inc. (SOLR), a maker of solar manufacturing equipment, may be an acquisition target after it increased its forecasts for margins and revenue and said it would expand into new business lines.

The company is “the most profitable public equipment company,” making it “a great acquisition target,” Theodore O’Neill, an analyst at Wunderlich Securities Inc., said today in a research note. O’Neill reiterated his “buy” recommendation, which dates to April 2010, and did not name any potential buyers.

GT Solar sells polysilicon and photovoltaic manufacturing equipment to solar cell producers, and last year began selling furnaces that make synthetic sapphires for light-emitting diodes. Expanding into a new market is helping it increase its margins and revenue, and the Merrimack, New Hampshire-based company said today that it plans to move into additional fields to maintain a stable revenue stream.

“We expect to further diversify our product portfolio in the areas of monocrystalline silicon, other crystal growth technologies and consumables,” GT Solar Chief Executive Officer Thomas Gutierrez said today on a call with analysts. He expects those plans to generate revenue starting in fiscal 2013.

GT Solar said it will change its name to GT Advanced Technologies, reflecting the shift.

Solar Lull

The diversification may help GT Solar weather a lull in solar installations, said Weston Twigg, an analyst at Pacific Crest Securities Inc. in Portland, Oregon. European nations led by Germany, Spain and France are curtailing incentives and competition from Chinese companies, depressing panel prices.

“There is concern about their solar side, because of a potential for overcapacity toward the end of this year,” Twigg said. He has had an “outperform” recommendation on the stock since April 2010 and a target price of $17 a share. Of the 15 analyst surveyed by Bloomberg, 12 have “buy” recommendations and 3 have “hold” recommendations.

Its biggest customers now include polysilicon maker GCL- Poly Energy Holdings Ltd. and solar panel maker LDK Solar Co., whose shares have slumped along with demand for panels and the materials that make them.

GT Solar rose 38 cents, or 3.3 percent, to $11.99 a share in Nasdaq Stock Market trading, after reporting higher fiscal fourth-quarter earnings and increasing its fiscal 2012 revenue forecast in a statement last night.

The company has risen more than 34 percent since the start of the year, while the WilderHill New Energy Global Innovation Index tracking renewable energy shares fell more than 1 percent.

Wider Margins

Gross margins in fiscal 2011 widened to 42 percent from 40.2 percent in fiscal 2010. The company expects fiscal 2012 revenue to be between $1 billion and $1.1 billion, compared with its earlier forecast of between $850 million and $1 billion. Margins are expected to be between 42 and 44 percent.

“It shows in their results that they are able to hold pricing and are hands down the market leader,” Twigg said. Heller said that “if there is cost pressure, they’re able to offset that.”

GT Solar gets 93 percent of its revenue from Asia with 19 percent coming from Hong Kong-based polysilicon maker GCL-Poly Energy Holdings Ltd. (3800) and more than 10 percent from Xinyu, China- based solar panel maker LDK Solar Co.

To contact the reporter on this story: Ehren Goossens in New York at egoossens1@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net

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