Energy Conversion Devices

1
Energy Conversion Devices

• Rebecca Chun-Ping Hsu
• Oct.18, 2005

2
Energy Conversion Devices

• Company Profile
• Current Stock Facts
• Management
• Industry Climate
• Financial Highlights
• Financial Forecasts
• Financial Summary
• Investment Recommendation

3
Company Profile

• Founded in 1960 and is based on Rochester
• Hill, Michigan
• Highly advanced technology research-
• oriented and owning more than 1150 patents
• 3 business segments, 4 core commercial
• businesses
• Two competitive products Photovoltaic (PV)
• Solar panels and nickel-metal-hydride (NiMH)
  
• batteries
• 746 employees

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Current Stock Facts

• Closing Price 34.05 (Oct.17)
• 52-Week High/Low 46.88/15.64
• Market Cap 988.68 Million
• Beta 1.85
• EPS (ttm) 1.71
• P/E (ttm) 20.06

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Management

• Robert C. Stempel Chairman and CEO
• (former chairman and CEO of GM). Age 71
• Stanford R. Ovshinsky founder, current
• president and chief scientist
  technologist.
• Age 81
• James Metzger Executive Vice President
• and Chief Operating Officer. Age 58

6
Industry Climate

• Gasoline prices went up 35 over the past year
• World PV shipments grew by 30 annually in
• the past two years
• The Solar market is projected to grow 35 a
• year for the next three to five year
• NiMH batteries had a growth rate of 20 over
  the
• last year
• In 2004 hybrids accounted for 0.5 of the new
• vehicle market but that is expected to jump
  to
• 1.3 in 2005 and about 3.5 by 2010.

7
Industry Climate
ECD Competitiveness

• Management's Business Restructuring Plan
• focus on accelerating the commercialization
  of
• 4 core commercial businesses products
• A new solar panel production line is expected
• to manufacturing by fall of 2006
• The formation of two new solar divisions
• A dominant patent portfolio of NiMH batteries ,
  
• including 91 US issued patents and 224
  foreign
• issued patents
• Making alliances with world-class automakers

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Financial Highlights
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Financial Highlights
Highlights in fiscal 2005

• Profit 50.3 M (a loss of 51.4M in fiscal
  04)
• Revenue increased from 66.3M(fiscal 2004)
• to 156.6M (fiscal 2005)
• Sales of PV systems increased 84 from
• 27.6M(fiscal 2004) to 50.8 M (fiscal
  2005)
• Revenues in the quarter ended June 30, 2005
• increased by 1.0 M compared to the same
• quarter in 2004 while expenses decreased by
• 2.4 M

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Financial Highlights
Trend Analysis ECD vs. SP 500
as of 16-Oct-2005
11
Financial Highlights
Trend Analysis ECD vs. its direct competitors
as of 16-Oct-2005
12
Financial Highlights
Industry Comparisons
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Financial Forecast
Revenue Forecasts (analysts)
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Financial Forecast
EPS Estimates (analysts)
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Financial Summary

• Required rate of return 16.10(assume Rf
• 4.3 and Equity risk premium of 6.38)
• Forecasted growth rate for next year 264
• (from analyst)
• Value of Stock 46 (from analyst)
• Mean Recommendation 1.8
• (Strong Buy) 1.0 - 5.0 (Strong Sell)

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Investment Recommendation
Pros

• Solar production is progressing well and the
  solar
• market is projected to grow 35 percent a
  year for the
• next three to five years
• Current solar panels win is likely only the
• beginning and the production capacity is
  expected to
• double in fall of 2006
• The actual revenue-generating of Ovonic Battery
  
• and Cobasys are landing. Chevron also
  agreed to
• continue funding Cobasys.
• Hybrid vehicles market is growing quickly

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Investment Recommendation
Cons

• The challenge of whether ECD could continue to
  cut
• down cost and hold positive cash flow .
• Hybrid vehicle growth could be less than
  expected
• by the market over time
• The ages of the CEO, Robert C. Stempel, and
• the current president, Stanford R.
  Ovshinsky
• ECD Ovonics currently carries a Beta with 1.85,
  
• which challenges our tolerance toward risk

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Investment Recommendation
BUY
ECD is a profitable company which carries
multiple high-value opportunities