GTAT Investment Analyst Round Table: Targets, Grades, PV Spoiler Alert and Feedback

Matt Margolis – 2/25/14

Credit Suisse $18 PT Grade B+ 2015 EPS $1.38 on $1.559B of sales, 2016 EPS $2.12B on $2.122B of sales.  No specifics were provided of product detail but they cited: “normalized earnings of PV, polysilicon, and sapphire businesses with upside from new products”.

UBS $18 PT Grade B- 2015 EPS $1.20 on $1.249B   2016 EPS $1.50 on $1.608B.  Apple sales estimated at $505M in 2014 and $980M in 2015.   2015 total sapphire revenue at $1.055B out of $1.249 (84% of Total Sales).  Estimated Mesa capacity at 1,500 furnaces.

Stifel $12.50-$14.90 PT Grade F 2015 EPS $0.45 on $1.086 sales. 2016 EPS $1.25 EPS on $1.637B sales.  No breakout was given on mix between Apple and other sapphire revenue.  2014 sapphire revenue $0.559B, 2015 sapphire revenue $0.94B and 2016 $1.1B “We view the company’s current product mix supporting $1.25 (2016) and look for the company’s March 15 new product and technology briefing fur further earnings growth drives into 2016”.   Stifel earned their grade, because it’s obvious they haven’t spent any time to dig into GT’s  corporate overview that was published in January 2014 to understand the growth factors for GTAT beyond sapphire.

Canaccord Genuity $21 PT Grade F  2015 EPS $0.50 on $1.109B sales.  2016 EPS $1.52 on $1.887.  Estimated 2,000 furnace capacity for Apple operations. “We reiterate our BUY pm GTAT as we believe the combination of Apple related earnings and the recovery in its LED and Solar business will result in above-consensus earnings growth and multiple expansion.  Canaccord earned their grade, because they failed to do any modeling for 2015.  They expect revenue in Q3 2014 of $324m followed by $264m in Q4 2014.  An annualized run rate of Q4 $264m x 4 is $1.056B versus their full year forecast of $1.109B,which tells me Canaccord assumes no new business coming online in 2015.  Canaccord doesn’t even give GTAT any credit that they will recognize any sizable chunk of their $600m order backlog.

Bank of America $15.50 PT  Grade Double F 2015 EPS $0.70 on $1.086B sales 2016 EPS $1.28 on $1.518B sales.  Bank of America cites that, “GTAT is becoming more of a Sapphire story”.  Bank of America earned their grade, because they failed to understand that GTAT is on it’s way to becoming a fleet of of thoroughbreds and not a “1 trick pony”.  I really wonder if Bank of America has even read the corporate overview or can cite one product GTAT sells besides sapphire.

Obscure Message to the Analyst Community

GT’s management was very clear that 2014 was the year of Apple and execution.  GT’s pipeline is currently $600m strong and very little of this will be booked in 2014.  GT’s management stated that equipment orders would start flying in 2H 2014 and will be ready for revenue recognition at the beginning of 2015.  GT mentioned that one of their customers (OCI) is already restarting their PV expansion project. If the analyst community wants to learn about GTAT’s up and coming products and industries they support perhaps they should try a google search.  The information is readily available and makes for a very interesting late night reading.

Every analyst cited Apple and sapphire as a major driver, but not one of them wanted to get into the Apple product ecosystem to adjust future growth for expanded sapphire usage across the portfolio.  The facility at Mesa is 1.3 million square feet or approximately 52 times greater than GT’s Salem, MA manufacturing facility.  GT’s salem facility held approximately 80-100 furnaces inside, using the same furnace to square foot ratio as Salem the Mesa facility can house between 4,200 and 5,200 furnaces.    Do any of the analysts follow Apple and industry growth projections?  Do the analysts understand the Apple portfolio of products and how GTAT can and will pair Hyperion with sapphire to create sapphire laminates that can be out rolled across Apple’s product portfolios once Hyperion is ready for commercialization in 2015.

The Obscure Analyst’s Analyst Report takeaway :

As an investor I was glad to see upward revisions to GTAT’s target price.  As the Obscure Analyst, I was surprised at how ignorant the analysts are to the markets that GT will begin serving in 2015.  Not one analyst understands GT’s Hyperion technology, that was purchased in November 2012.

GT management left us with this information during Monday’s call which relates directly to Hyperion and Solar Cells:

we have a deployed a new technology that we expect will significantly impact the economics of producing solar cells and modules. This technology was developed and comes out of a research operation we established in the Bay Area over a year ago to focus on advancing the state of the art and the design and assembly of solar cells and modules. We look forward to talking with you about this development on our March ‘14 webcast.

Well here is your spoiler alert:  Hyperion is going to be  a “disruptive technology” and a “game changer” that can and will be applied across all of GTAT’s platforms in the foreseeable future and for the foreseeable future.   During the March 14, 2014 webcast GT management will most certainly focus some of it’s attention on the design and assembly of solar cells and modules.  I’ve done my best to translate the patents so everyone can understand the key takeaway.  I’m sure the sci-fi team at GT Advanced Technologies will give a cleaner explanation but this is my best shot!  Essentially GT has patented a new process that likely creates the lowest cost, thinnest and most efficient solar cell technology on the market   The process to create this amazing innovation begins by leverage GT’s Hyperion technology (which is protected by over 50 patents) to fire hydrogen ions against a solar cell to create super thin solar cells that can be used in PV technology (solar panel).   The super thin solar cells are more efficient due to design (cutting angle) allowing them to improve efficiency.  They are lower cost due to Hyperion exfoliating abilities which allow for one of if not the thinnest solar cell produced in the industry (I hope the analysts ask if TG doesn’t tell us anyways).  Further cost reductions are found because the Hyperion method of exfoliating the solar cells reduces waste that results from through traditional “kerf” methods.

Obscure Analyst’s Spoiler Alert Takeaway: GTAT may have just come up the most efficient solar cells available on the market today due to the degree of the cut plane of the solar cells which allows for more light absorption than traditional methods.  The cost of the solar cells is greatly reduced because Hyperion allows up to a 2 for 1 benefit on thinness (current benefit might be 1.75 to 1) but it was 2:1 when GTAT acquired Twin Creeks in 2012.   Lastly, the method of using Hyperion versus traditional kerf methods of cutting solar cells will greatly reduce the amount waste, which will lead to further cost savings.  If I had to put names on who they are partnering with I would go with Yingli Green Energy or Trina Solar, who finished 2013 as #1 and #2 in PV supply.  Below are two of GTAT’s  key patents related to the growth and bonding of thin lamina.

 
EPITAXIAL GROWTH ON THIN LAMINA 

BACKGROUND OF THE INVENTION

[0001] Sivaram et al., U.S. patent application Ser. No. 12/026,530, “Method to Form a Photovoltaic Cell Comprising a Thin Lamina,” filed Feb. 5, 2008, owned by the assignee of the present invention and hereby incorporated by reference, describes fabrication of a photovoltaic cell comprising a thin semiconductor lamina formed of non-deposited semiconductor material. Using the methods of Sivaram et al., photovoltaic cells, rather than being formed from sliced wafers, are formed of thin semiconductor laminae without wasting silicon through kerf loss or by fabrication of an unnecessarily thick cell, thus reducing cost. The same donor wafer can be reused to form multiple laminae, further reducing cost, and may be resold after exfoliation of multiple laminae for some other use.

[0002] Referring to FIG. 1A, in embodiments of Sivaram et al., a semiconductor donor wafer 20 is implanted through first surface 10 with one or more species of gas ions, for example hydrogen and/or helium ions. The implanted ions define a cleave plane 30 within the semiconductor donor wafer. As shown in FIG. 1B, donor wafer 20 is affixed at a first surface 10 to receiver 60. Cleaving is most easily achieved by heating, for example to temperatures of 500 degrees C. or more. Referring to FIG. 1C, lamina 40 is heated and cleaves, or exfoliates, from donor wafer 20 at cleave plane 30, creating second surface 62. It has been found that the step of implanting to define the cleave plane may cause damage to the crystalline lattice of the monocrystalline donor wafer. This damage, if unrepaired, may impair cell efficiency. A relatively high-temperature anneal, for example at 900 degrees C., 950 degrees C., or more, will repair most implant damage in the body of the lamina.

[0003] In embodiments of Sivaram et al., additional processing before and after the cleaving step forms a photovoltaic cell comprising semiconductor lamina 40, which is between about 0.2 and about 100 microns thick. In other embodiments of Sivaram et al., lamina 40 may be, for example, between about 0.2-50 microns thick, between about 1-20 microns thick, between about 1-10 microns thick, between about 4-20 microns thick, or between about 5-15 microns thick, though any thickness within the named range is possible. FIG. 1D shows the structure inverted, with receiver 60 at the bottom, as during operation in some embodiments of Sivaram. Receiver 60 may be a discrete receiver element having a maximum width no more than 50 percent greater than that of donor wafer 20, and preferably about the same width, as described in Herner, U.S. patent application Ser. No. 12/057,265, “Method to Form a Photovoltaic Cell Comprising a Thin Lamina Bonded to a Discrete Receiver Element,” filed on Mar. 27, 2008, owned by the assignee of the present application and hereby incorporated by reference. Alternatively, a plurality of donor wafers may be affixed to a single, larger receiver, and a lamina cleaved from each donor wafer.

0004] In summary, the primary stages of producing a lamina are ion implantation, exfoliation (cleaving the lamina from the donor wafer), and annealing (to repair defects in the lamina).

BONDING OF THIN LAMINA

BACKGROUND

[0002] Sivaram et al., U.S. patent application Ser. No. 12/026,530, “Method to Form a Photovoltaic Cell Comprising a Thin Lamina,” filed Feb. 5, 2008, and issued as U.S. Pat. No. 8,481,845, owned by the assignee of the present disclosure and hereby incorporated by reference, describes fabrication of a photovoltaic cell comprising a thin semiconductor lamina formed of non-deposited semiconductor material. Using the methods of Sivaram et al., and others, photovoltaic cells and other electronic devices, rather than being formed from sliced wafers, are formed of thin semiconductor laminae without wasting silicon through kerf loss or by fabrication of an unnecessarily thick cell, thus reducing cost. The same donor wafer can be reused to form multiple laminae, further reducing cost, and may be resold after exfoliation of multiple laminae for some other use. Methods are needed for handling thin lamina in order to process them into electronic devices.

SUMMARY

[0003] Methods and apparatus are provided for bonding a thin lamina to a carrier, the methods may comprise providing a thin lamina wherein the lamina has a first side and a second side and wherein the first side of the lamina is separably contacted to a support plate; providing a first carrier having a first side and a second side and wherein the first side comprises a layer of adhesive material; contacting the second side of the thin lamina to the first side of the first carrier; fixing the lamina to the first carrier wherein the fixing comprises applying a first application of heat and a first application of pressure to a portion of the lamina and the first carrier; removing the support plate; applying a second application of heat and a second application of pressure to the lamina and the first carrier wherein the second application of heat and the second application pressure promotes an adhesive bond between the lamina and the first carrier and wherein the second application of pressure comprises moving the lamina, the first carrier and the cover sheet between a pair of rollers.

Two additional relevant patents are below

Photovoltaic Cell Comprising A Thin Lamina Having A Rear Junction And Method Of Making 
ASYMMETRIC SURFACE TEXTURING FOR USE IN A PHOTOVOLTAIC CELL AND METHOD OF MAKING 

The Obscure Analyst’s Analyst Report takeaway :

My Final Closing Thoughts:  I am very disappointed in the lack of research and analytics that went into these reports with the exception of Credit Suisse and UBS.  My brother-in-law jokes that I am the “couch” analyst, because he knows that’s where I do all my research.  In closing, I wanted to reference to one of my favorite movies, Good Will Hunting, because one scene in particular resonates very well right now.  Will Hunting (played by Matt Damon) was obviously brilliant and but he was working as a janitor at MIT and he kept solving the MIT professor’s math problems that not even the MIT students could understand them.   If you recall during one of the bar scenes, Will Hunting was vying for the attention of a young college co-ed and he was competing against a 1st year grad student named Clark.  Will and Clark starting a heated debate on history, a test of wits.  Will’s perfectly fitting retort to Clark:

"You got that from Vickers.  Work in Essex County, page 98, right? Yeah, I read
that, too. You gunna' plagiarize the whole thing for us? Do you have any thoughts
that...of your own on this matter? Or do you-- is that your thing? You come into a
bar, you read some obscure passage, and then pretend you, you..pawn it off as your 
own..as your own idea...." 

I think it’s time the analyst community comes up with some original thought of their own rather than taking GTAT’s guidance as gospel and pawning it off as their own idea.  Will Hunting received his education for free at the public library, in this regard I am just like Will Hunting.  I conduct my own research using the tools and information that are available to the public.  At times it can be a painful act, but in the end you are handsomely rewarded with information and enough support to connect the dots and come up with your own original idea.  But hey what do I know?  I’m just the Obscure Analyst!

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Full Disclosure: I am long GTAT and have no plans to buy or sell any holdings over the next 72 hours