GTAT Hyperion Equipment Business worth $26-40 at a Minimum Right Now! – by Matt Margolis
I have updated my analysis based on reviewing the call. Hyperion 4 can produce 10x more power than any existing implanter tools on the market and GT is pricing their technology at the same ASP $ level as competitor implanter tools on the market. Hyperion 3 took 200 man years to assemble and GT has moved from the Hyperion 3 to the Hyperion 4, which produces 2 mega electron volts up from 1 mega electron volts, that could be found in the Hyperion 3. The technology is protected by 55 patents and 25 more that are pending. The current patents are across the entire solution, application, process and equipment. This is the only exfoliating machine on the market because of it’s unique design and power. As a result I am upping my EPS and Revenue estimates and taking management’s guidance of 200-250 Hyperion 4 unit sales by 2018. The equipment sales from Hyperion 4 has potential to produce over $3b in in annual revenue by 2018 and contribute over $5 EPS. The EPS estimate is based on historical margin within the traditional margin range of 35-45% for GT equipment sales.
GT management spent several hours going through their technology tool set and threw a lot of information at investors. I am attempting to put together the pieces to come up with a breakdown for everyone. The first area I wanted to focus on was the Hyperion 4, which is commercially ready in 2014. GT management also provided investors with their 4 year projected unit sales of Hyperion. Going from approximately 10 units to 200-250 units by 2018. The unit number is not tremendous but at a ASP of $4-15m each, the dollars and cents add up fast. I have modeled up a sales ramp from 2015 to 2018 along with 3 valuations on ASP, from $4m to $15m with a most likely scenario of somewhere in the middle at $9.5m per Hyperion 4 unit. I am valuing just the equipment sales component of Hyperion and this has nothing to do with material sales such as sapphire laminate for electronic devices and consumer applications.
As you can see from my chart Hyperion has the potential to over $2b a year in sales and contribute over $3.00 per share to GT’s bottom line by 2018. I have assumed GT can convert Hyperion sales of 50% of their potential identified market. It is clear from the call today that the Hyperion 4 is head and shoulders above the competition. Below are my estimated 2015 and 2016 contributions assuming middle of the road pricing and a 50% conversion rate of the potential market. The Hyperion 4 technology is now a proven solution and is being used by beta customers today and will be delivered to several other customers by the end of the year in LED, Medical and other areas.
2015 – $95m – $0.15eps
2016 – $808m – $1.31 eps
Taking FY16E x20-30 I’m coming up with $26-40 valuation for just Hyperion 4 equipment sales! However, if Hyperion is as good as GT management thinks it is my valuation is still very low.
Below are some Hyperion slides from today’s presentation.
Full Disclosure: I am long GTAT and have no plans to buy or sell in the next 72 hours