Monday, November 27, 2006

Calls of Note Part 2

- UBS notes they attended Renewable Energy Corporation's (#3 polysilicon company) field trip to both its solar wafer plant and its analyst meeting in Norway last week where the company suggested polysilicon could likely remain in shortage until 2011. The company also suggested silane gas (key feedstock to make polysilicon) could be in short supply as REC has about 70% share and MEMC (NYSE:WFR) has about 25% share.

Renewable Energy Corporation estimates its new fludized bed reactor (FBR) based polysilicon plant, being built now (production expected in 2H08), will have about 50% less costs than its original Siemens based polysilicon plant. Firm notes that MEMC has been the only polysilicon company with FBR technology for the past 5-10 years.

Also,recent discussions with industry contacts suggest that MEMC has recently re-negotiated its semiconductor wafer contract with Infineon for 2007. They believe MEMC was sucessful in raising prices by 9-10% from its prior contract pricing for both 200mm and 300mm semiconductor wafers.
Maintains Buy and $60 tgt.

Notablecalls: I have highlighted UBS's positive comments on WFR in the past and with good results. While I don't think the price hikes with IFX provide drastic upside to current ests, they do add to the positive perception of the space. The stock has been inching up and looks to be on the verge of another move upward. Think WFR may soon be a $40 stock. Even then UBS' tgt would provide 50% upside.

No comments: