PV Crystalox - Solar stock

Solar power stocks risk getting short shrift on grey, near-zero-degree days in January. So it proved with PV Crystalox Solar, the Oxfordshire-based maker of silicon wafers used to produce solar cells. Shares in the mid-cap company — one of the London stock market’s dozen worst performers in 2009 — failed to budge, despite a year-end trading update that showed shipments over the past four months modestly better than forecast.
Ironically, the improvement in sales — largely in Germany and Japan — can be credited to the phenomenon that has brought the company’s shares so low: the collapse in solar cell prices. With prices down 45 per cent last year (amid static demand and increased Chinese supply), the economics of solar generation have become much more favourable — closer to the point of “grid parity”, where the cost of consumers producing their own power from roof-top panels is the same as buying it in from the grid.
PV Crystalox’s immediate appeal is that, fuelled by government initiatives to meet long-term renewable energy targets, solar installations in Europe are forecast to rise strongly in 2010: to 10.8 GW from 6.8 GW in 2009 on usually reliable industry estimates. The concern is whether solar prices will get any worse.
However, PV Crystalox remained profitable even at last year’s depressed prices (a forecast £40 million at the pre-tax level), sits on £56 million of net cash, has a strong customer base and, through a new manufacturing plant in Germany, is less reliant on buying silicon from elsewhere. Those strengths suggest that the low rating of shares — about nine times 2010 earnings — owes more to the lack of a London-listed peer group than its medium-term prospects.
At 68¼p, buy.