Steven Ralston, CFA
Zacks initiates coverage of SunSi Energies
Zacks has initiated coverage of SunSi Energies (SSIE: OTCQB) with a Neutral rating. SunSi focuses exclusively on the production and sales of trichlorosilane, the basic chemical feedstock used in the production of purified polysilicon, an essential material in the production of solar cells for photovoltaic panels. Having evaluated the value chain related to the production of photovoltaic solar cells in the growing solar industry, management sought out the optimal investment opportunity. Management determined that the highest profit potential lay in the production of trichlorosilane. Furthermore, China was targeted due its global low-cost position. Management’s objective is to become the largest trichlorosilane producer in China through the acquisition, development and operation of a portfolio of trichlorosilane facilities, which (with subsequent capacity expansions) will increase the company’s total annual capacity to 140,000 metric tons by the end of fiscal 2012.
Management has aggressively, but with the appropriate due diligence, completed two acquisitions. Between December 2010 and March 2011, the company acquired majority ownership positions in two Chinese companies (60% of the Wendeng He Xie Silicon Company Ltd. trichlorosilane production facility and 90% of the Zibo Baokai Commerce and Trade Company trichlorosilane distribution company), which together control trichlorosilane production of approximately 47,000 metric tons. Management plans to increase the capacity at Wendeng by 240% or by an incremental 53,000 metric tons by the end of 2011. The company is also pursuing additional acquisitions. Our initial target is $3.25.
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