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Monday, December 29, 2008
SGL Group - 2009 Research
ClikImage: © 2008 - Courtesy Of Nordex AG

SGL Group Continues The Upwards Earnings Trend

SGL Group is a carbon company, meaning that they are experts in the utilisation of the element Carbon in a whole host of applications. Towards Earth sustainability initiatives, SGL Group contributes their knowledge and products in the development and fabrication of wind turbine blades, and they are experts on providing carbon fiber (fibre) composites for the wind turbine industry. SGL Group trades on the German Xetra exchange Xetra XE:723530 or SGL.DE and are traded in Euros. theirEarth 'Green Investment' last reviewed SGL Carbon more than a year ago on  December 16, 2007.

This 2009 research note is an update from our research last year. We still believe that based upon current performance SGL Group remains as a 'growth' stock for the next ten to fifteen year horizon. They are well placed with their carbon composite technology to capitalise on the expected huge growth in the wind turbine industry by supplying materials for wind turbine blades, and the wind turbine industry growth is expected to be an annualised 20-25 % over the next twelve (12) years. SGL Group is also actively involved other carbon material applications in the electrical and components industries which are also experiencing growth. This report outlines SGL Group's performance based upon their interim (unauditied) Q3 2008 Quarterly Report figures.

SGL stock has fallen in valuation with the global sell-off of equity in the last five months. The current share price (December 29, 2008) is 23.00 EUR with a 52wk low of 13.70 EUR (Oct 27/08) and a 52wk high of 50.19 EUR (May 19/08). The current PE is a very good 11.17. SGL executive management states that in 2009, because of the global financial crisis, much like any company, they cannot predict the full year earnings with a high degree of certainty, but they remain confident that the large infrastructure projects that use their carbon material will continue unabated.

At the current PE, and because it is only 45.8% of its 52 wk high, SGL Group looks like a very good acquire and hold stock for a long-term investment. Based upon European directives for sustainable energy and new Chinese mandates towards environmental protection and wind farm developments, the demand for carbon fiber in wind turbine applications can only accelerate upwards, from which SGL Group should benefit in the same proportion. In the first nine months of 2008, the sales revenue over 2007 was 1.1378 billion Euros versus 1.0053 billion Euros for an increase of 13.2 %. This would have been a higher figure (estimated at 18 %) had there not been a large currency variance from the weakening of the U.S. dollar versus the Euro. The first nine months SGL Group profit before tax was up 64.9 % over the first nine months of 2007 (2008 9 months: 208.0 million Euros versus 2007 9 months: 126.1 million Euros).

From a risk management perspective there is always the possibility of further general trend equity devaluation that could follow further weakness signals in the global economy. At some point, however, SGL Group's PE ratio should prevail over the general sentiment, because it is a clear growth stock. Investors who would like to take a position may wish to take a staged packet accumulation approach that acquires based upon the general equity trend and proportionate in quantity to the expectations trend towards lower index pricing volatility in the overall market. For the long-term hold investor, however, the current prices of SGL Group appear attractive at this time if you are looking at the next ten year horizon. 

Investor Note: The author has no material interest whatsover with SGL Group, nor is he associated in any manner with someone, an institution, or any other collective gathering of individuals that have associations with SGL Group. 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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