Generac (GNRC) Enters Microinverter Space With Chilicon Buyout

Generac Holdings Inc. GNRC have forayed in to the microinverter market with the acquisition of Chilicon Power, LLC for an undisclosed amount. The transaction is likely to expand its suite of clean energy products and augment its leading position in the market.

Based in Pacific Palisades, CA, Chilicon designs and manufactures grid-interactive inverter systems and monitoring solutions and reportedly builds the world's highest efficiency 60-cell module inverter. Its highly scalable technology offers simple yet powerful and robust microinverter solutions that boast key intelligence to power residential or business operations from AC coupling to battery storage and generators with the push of a button. In particular, its power inversion and monitoring system technology maximizes PV system production, lowers installation cost and promotes end-user satisfaction.

The acquisition expands Generac’s solar and storage product offerings as significant changes in the energy landscape, drastic climate change, aging power infrastructure and deployment of superfast 5G technology spur secular growth opportunities. The company aims to capitalize on these key growth drivers by generating more sales through higher market penetration and continued focus on research and development. A diversified distribution channel further ensures that the products reach a broad global customer base. Notably, the company has the largest network of factory direct independent generator dealers in the industry in North America.

With more than six decades of industry experience and technology knowhow, Generac is one of the leading manufacturers of home backup generators, offering the widest range of power products in the marketplace for diversified end users. The company intends to leverage its experience and core competencies to strengthen its position in the emerging residential energy storage and monitoring markets. While its Mobile Link remote monitoring capability offers a Wi-Fi-enabled feature to conveniently check the status of a generator online and receive maintenance and service alerts, the “Fleet” feature enables its distribution partners to monitor the installed base of customers for a more proactive service experience. Such a comprehensive product portfolio and service capabilities augur well for the long-term growth of the company.

Generac intends to diversify its business model from being solely ‘‘equipment centric’’ to a systems and services provider through connectivity solutions and subscription-based applications, with emphasis on improving the end-user experience and helping customers lower utility costs. This, in turn, is likely to help unlock new business opportunities and generate steady revenues from subscriptions and spare parts. The company leverages data obtained from connected devices by developing predictive analytics that help in continuously improving product quality, sales processes and tools, energy optimization, aftermarket penetration, customer experience and alignment with dealers. In addition, the company pursues potential acquisition opportunities to monetize an ecosystem of devices that relate to energy use, storage, generation, control and optimization to further strengthen its leading market position. This holistic growth strategy offers a competitive advantage to Generac against other firms.

In addition, Generac’s products are well suited to accelerate the transition from traditional fossil fuel to clean environment-friendly natural gas. The emergence of low cost, environment-friendly natural gas generators have helped to increase the penetration of standby generators over the past decade in the light commercial market. Moreover, low and stable natural gas prices offer an enticing opportunity to end users to reduce utility bills by using renewable energy solutions. An aging population and increased cases of power outages due to inclement weather conditions and catastrophic events like wildfires have amplified the importance of backup power for critical infrastructure facilities. In addition, a large installed base of backup power for essential telecommunications infrastructure for the rollout of next-generation 5G wireless networks has enabled the uninterrupted flow of critical communications and other voice and data services.

Amid such positive growth drivers, the buyout is further likely to strengthen its competitive position in the market. Shares of Generac have surged 239.2% over the past year compared with the industry’s growth of 151.4%.

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We remain impressed with the inherent growth potential of this Zacks Rank #2 (Buy) stock. Some other top-ranked stocks in the broader industry are Babcock BW, Cogent Communications Holdings, Inc. CCOI and United States Cellular Corporation USM, each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Babcock delivered an earnings surprise of 42.1%, on average, in the trailing four quarters.

Cogent delivered an earnings surprise of 29%, on average, in the trailing four quarters.

United States Cellular delivered an earnings surprise of 123.9%, on average, in the trailing four quarters.

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