11 unit order to drive 35%+ sequential revenue growth


Steven Ralston, CFA

11 unit order to drive 35%+ sequential revenue growth

Today, XZERES (XPWR) announced that it has received a Letter of Intent for a $3.2 million turbine order from a customer in Vietnam. After the successful completion of a pilot program of a single unit for three months, the customer has decided to move forward. Other wind power companies have pursued this opportunity and failed. However, due to the high level of service and the quality of the 442SR 10-kilowatt wind system, XZERES was able to achieve this milestone.

The potential for additional follow-on orders is high. Though the announced order is for 11 units, the project for remote island electrification in Vietnam is expected to total 100 turbines. Management expects that these 100 turbines may be delivered over the next 17 months. In addition, the ultimate potential may even be more substantial since there are over 3,000 islands in Vietnam that need power.  

There are significant opportunities for micro-grid island electrification applications elsewhere in Asia, especially in the Philippines and Japan. Vietnam will serve as a working model for potential customers, and management is planning to actively pursue and develop these prospects.

Sequential quarterly sales growth is increasing, with the company achieving 56% sequential revenue growth in the latest reported quarter. Due to the many initiatives recently implemented and also planned for fiscal 2012, such as expansion into Asia, we expect that the company’s sequential sales growth rate will continue to be at least 34% during fiscal 2012. Management’s internal goal (not guidance) is to generate over $5.9 million in revenues during fiscal 2012. In addition, management expects that ultimately, the majority of sales will be through the direct channel, leading to a higher gross margin.

We reiterate our Outperform rating on XZERES.

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