PV Crystalox (LON:PVCS) announced its results for the year to 31 December 2010 on 24 March and what a comprehensive read they are.  I first bought into the Company in April 2009 (way before my blog started) and reviewed it on the blog in December 2010.





  • Volumes of wafers have increased, more than offsetting the continued price fall = revenue + 6%. Gross margins fell from 36% to 29% due to continuing price falls. Operating margins fell from 17% to 13% despite cost reduction measures. EBITDA of £36m, down 8% (v FY09). Operating cash was £16m, down 56% (v FY09) due to increased stock levels. EBIT of £29m, down 21% (v FY09).
  • PAT of £20m, down 21% (v FY09). Free Cash Flow - outflow of £5m v inflow of £4m in FY09, due to investment in capex (without grants). FY10 EPS of 5.0p, down 21% (v FY09). FY10 DPS of 2.6p, down 25% (v FY09) and equates to a yield of 4.6%. 
  • Chinese and Taiwanese customers accounted for 42% of revenue (up from 12% in 2009). 75% of revenues are now generated in Asia and 25% in Europe & USA. No immediate impact on Japanese customers, suppliers or operations from earthquake and tsunami. A strong Yen has a negative impact on PVCS's results, although the back-lash against nuclear is likely to be positive for solar in the long-term. A strong start to 2011 due to strong growth in global installations - with H1 volumes expected to be 45+% up on H1 2010

Valuation Metrics

  • NAV of £245m, including Net cash of £48m on balance sheet 
  • Market cap of £238m based on a share price of 57.2p. This represents a PER of 11.4x
  • EV of £190m. EV/PAT ratio of 9.5x and EV/EBITDA of 5.3x
  • ROE of 13% in FY10


Whilst PVCS is not particular expensive in terms of valuation and has a strong balance sheet, what concerns me most is the future. As the solar market evolves and the Chinese in particular pick up the pace, PVCS has an increasingly 'commodity' feel to it, with falling prices, squeezed margins and falling shareholder returns looming. Ok, it is investing in its facilities, the global market is growing and it appears to be a well-run and financed-company, but…

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