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TPI Composites- Blowing in the Wind

TPI Composites (NGM) makes wind blades for wind turbines which it sells to turbine manufacturers; in fact it is the only independent manufacturer of composite wind blades for the high growth wind energy market with a global footprint, explains small cap expert Tom Bishop, editor of BI Research.

It has nine wind blade manufacturing plants with two more under construction, plus three plants that make the tooling and do R&D. These facilities nicely span the globe with locations in the U.S., Mexico, Denmark, China, Turkey and India.

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From 2013-2018 revenues have grown at a com-pound annual rate of 37%, and the Company projects 50% growth in revenues in 2019 and to double revenues from 2018 to 2021.

There are more drivers behind this recommendation than at the Indy 500. But let’s start with the undeniable trend to renewable energy. BNEF (Bloomberg) estimates $11.5 trillionwill be invested in renewable power generation capacity through 2050, the bulk of which will be for wind and solar.

Equally as compelling, the levelized cost of energy (LCOE) for onshore wind has come  down 69% in the past 12 years such that even without subsidies, tax breaks, and other incentives, wind energy has become competitive at or below new combined cycle gas turbines.

There is an ever growing trend to more and longer wind blades, now reaching over 70 meters… for a single blade (with tolerances measured in millimeters)! Good grief ... that’s more than the wing span of a 787 (about 60 meters) from tip to tip, and it is estimated that 12% of blades will be longer than 80 meters by 2022.

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Blades can go for $140,000 (and more) each and are 20-25% of the cost of wind turbines. And then there is the increasing trend of wind turbine OEMs outsourcing the production of their blades to companies like TPI, now up to 59% outsourced.

Plus there is TPI’s steadily increasing market share up from 3% in 2013 to about 15% today (and climbing) due to its technological, reliability and global foot print advantages.

TPI is alsogetting into producing lightweight composites for the transportation industry. Its composites are lighter than aluminum and lighter weight translates into longer range, important for electric vehicles.

TPI is in production on bus bodies and chassis for Proterra for electric buses. It’s also in development with GM for bodies for EVs and with Navistar for truck bodies, with a goal of $500 million in annual revenues from this new segment within the next 4 or 5 years.

So TPI Composites is in a great place at the right time and at a good price (coming off a transitional year). Our proprietary ranking system weighs this all out and gives the shares a strong buy rating.

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