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Thursday, November 27, 2008
Nordex Wind Turbines - 2009 Research
ClikImage: © 2008 Nordex AG

Nordex - Wind Energy On The Move

Our last Research Report on Nordex AG was on January 24, 2008. Nordex AG is headquartered in Norderstedt, Germany, and was founded in 1985. Nordex AG is the holding company with 100% control of Nordex Energy GmbH and Nordex Energy B.V., and they are a 100% wind turbine industry company. Nordex recently released their Q3 2008 results which detail their 2008 financial progress to date, and also some future looking concepts for them for 2009 and beyond. Nordex's overall financial and market performance correlates well with the overall performance of the global wind turbine industry, with the exception that Nordex is experiencing significant growth of its business due to significant year over year sales, which is both a huge positive, and an element requiring significant oversight of their business implementations and processes.

Nordex stock equity, traded primarily on the XETRA Dax has not escaped the recent turmoil associated with equities in the financial markets, and the Nordex AG's stock price has come down from a 2008 52wk high of EUR 37.27 (Dec 6, 2007) to a recent 52wk low of EUR 8.00 (Oct 27, 2008). The closing price of Nordex as of this research date (Nov 27, 2008), was 10.84 on the German Xetra Dax with a very attractive PE of 12.91 on this date. 

In 2007, Nordex's overall global wind turbine market share was 3.4% of the industry (Source: BTM Consult, March 2008). Although the equity markets have been under significant downward pressure, there is still a much better longer term stock price prognosis for Nordex AG, though the possibility exists that there could be further short-term downside risk pressure on Nordex shares if there is further market related general equity selling pressure. Over the long-term, however, the stock s expected to perform very well up to 2020 and beyond.

In comparison to the wind turbine market leader Vestas, we believe that Nordex carries a slightly higher to Vestas risk premium because of their significant sales growth versus the risks associated with the management of internal infrastructure enlargement, but with this also comes a higher potential for equity price growth, should Nordex hit all of their targets at 100% or greater. Nordex is very strong in the European sector (specifically UK and Italy), and they are expanding into the United States with a new manufacturing facility in Jonesboro, Arkansas. The U.S. is currently an untapped market for wind turbine installations, and zero emissions energy infrastructure support is expected to come much higher on the new Administration's agenda. China is also rapidly increasing their uptake in zero emissions wind turbine energy, and the consensus is that China will alsomove strongly to protect their home environment and create a strong base for new environmental industries.

Looking at Nordex's Q3 2008 financials, we like the honesty embedded in the Nordex Q3 report concerning their analysis of both positive upside growth, and the negative short-term downside risk associated with both the 2009 future sales projections and the 2009 stock pricing. The current float of Nordex shares on the market is 47.3 % free float traded, 21.8% held by SKion/Momentum Capital/Klatten, 14.4% CMP, 10.6% Goldman Sachs, 3.8% Nordvest and 2.1% HSH Nordbank. The total share float volume is 66.845 million shares with a market capitalisation at today's price of 724 million Euros, which is quite reasonable given the significant growth potential of this company.

For the first 9 months ending September 30, 2008, Nordex AG had a 55.6% increase in sales revenue over the first 9 months of 2007, with 2008 sales of 784.295 Mil EUR versus 2007 first 9 months sales of 504.145 Mil EUR. New orders for 2008 (9-months) slipped slightly from the 2007 823 Mil EUR figure to a 2008 (first 9months) 796 Mil EUR (-3.3%). Nordex has attributed the slightly lower new order results to the weakening of the capital investment climate over the last few months, caused by the financial crisis. In 2008 the order backlog grew from Sept 2007 EUR 1.9 Bil to Sept 2008 EUR 3.3 Bil (+73.7%).

As a summary analysis, Nordex AG's stock price looks attractive at today's prices considering it is a well established company in the wind turbine industry with considerable percentage growth potential above most of its peers. Nordex AG will probably experience further accelerated growth over the next three years, and they will need to concentrate heavily on having high quality business expansion plans for production capacity, production processes, supplier base quality, employee utilisation, and warranty claim risk reduction. These general risk management areas have been generally noted in the 2008 Q3 Nordex report.

From 2008 to 2020, the overall global wind turbine industry is expected to have a 12 year annualised growth rate of between 20-25 %. Nordex's revenues and profit could increase at east in line with the overall industry expansion rate, however it is expected to exceed this rate over the next three to five years. If the company can get their expansion strategy implemented very well, Nordex stock will give above average returns over the next five years (at current prices). Nordex has a key product offering in the 2.5 MW N100 turbine, which is ideal for high energy generation in low average wind speed conditions, and appears to be much sought after by the energy companies for steady state continuous low wind speed wind farms. 

In 2008,some of the key orders received by Nordex AG were the following:

NORDEX AG - 2008 ORDERS

Date             Country            Quantity         Type                    Purchaser       

16 Oct 08   France             30               N100-2.5 MW        GDF Suez

23 Sep 08  Belgium           22               N100-2.5 MW        Air Energy

29 May 08  Turkey              9               N90-2.5 MW          Bilgin Enerji

5  Mar 08   UK/FR/ES/IT     50               N80/N90/N100      Falck Renewables

5 Mar  08   UK/FR/ES/IT     50               N80/N90/N100      Falck Renewables (Option To Pur)

Investor Note: The author has no material interest whatsover with Nordex AG, nor is he associated in any manner with someone, an institution, or any other collective gathering of individuals that have associations with Nordex AG. Statements made are not intended to influence any decision making process, but are instead a perspective from the author about the investment type in question. The reader is encouraged to seek other opinions in order to build their own collective understanding about this investment type.

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