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BioSolar, Inc (OTCBB: BSRC)
Untitled Document
BioSolar, Inc.
27936 Lost Canyon Road, Suite 202
Santa Clarita, CA 91387
Tel : (661) 251-0001
Fax : (661) 251-0003
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Market Data:
Symbol / Exchange
Coverage Initiated
Current Price
Price Target
Outstanding Shares
Market Cap.
Average 3M Volume
Jan 3rd, 2007
Speculative Buy
130.32 million
$109.47 million
Company Introduction
Analyst Summary
Recent Developments
Industry Outlook
Company Introduction

BioSolar, Inc. (OTC BB: BSRC) is developing innovative bioplastic solar cell components made from renewable plant sources. The Company’s technology can help reduce the per watt manufacturing costs of solar cells; management anticipates substantial cost saving for manufacturers through the use of its bio-based plastics in solar cell production.

The high-volume manufacturing of solar cells using bio-based rather than petroleum-based components will produce both cost savings and environmental benefits. BSRC targets applications for its bio-based materials in the manufacture of solar cell back sheets, substrates and superstrates.

BSRC was incorporated in Nevada on April 24, 2006 as BioSolar Labs, Inc. changed its name to BioSolar, Inc. on June 8, 2006 and began trading as a public company in February 2007.

Analyst Summary

Since our initial report, BSRC’s share price has soared 180% to $0.84 and surpassed our price target. In addition the Company has increased its visibility within the investment community and improved trading volume and liquidity. The latest industry trends and Company developments discussed below are reasons we are raising our price target for BioSolar, Inc. to $1.37 and reiterating our Speculative Buy rating.

BSRC’s stellar growth in recent months reflects the Company’s rapid progress towards commercializing its products and technology and industry trends that favor solar energy deployment.

During the last three months, the Company has set the stage for the commercial launch of its products by implementing a tactical scenario to reduce the amount of time for attaining Underwriters Laboratory (UL) certification for PV modules incorporating its bioplastic backsheet material. UL certification is required to sell photovoltaic modules in the US.

In preparation for the certification process to be undertaken by its PV module manufacturing customers, BSRC is in the process of testing modules incorporating its proprietary bioplastic backsheet film at environmental testing facilities, including the National Renewable Laboratory (NREL).

In addition, the Company announced in December that it had successfully completed a scale-up production run of bio-based plastic film to be used as a backing sheet for photovoltaic cells. BSRC’s bio-based polymer was extruded at a full production width of 55 inches, thus enabling the Company to encounter and correct any potential scale-up problems. This successful production run at maximum width moves the Company one major step closer to commercial production and product sales.

The following industry factors also help fuel share price gains:

High oil prices. In November, crude oil futures approached the psychological barrier of $100/barrel, although prices have since declined to $91/barrel. High oil prices make solar energy more price-competitive and stimulate demand for photovoltaic products.

Constrained silicon supply. Solar photovoltaic manufacturers who rely on polysilicon semiconductor materials are encountering problems securing polysilicon supplies and paying higher prices since this material is derived from oil. BSRC’s bioplastic films and resins are not affected by silicon supply shortages and rising oil prices. As a result, BSRC is well-positioned to supply PV manufacturers with its films and capitalize on its cost advantages to rapidly build market share and revenues.

Reduces competitiveness of biofuels. Rising corn and soybean prices are increasing the costs of biodiesel, which relies heavily on vegetable oils in its manufacture. Because of high vegetable oil prices, biofuels are becoming more expensive, causing solar energy to emerge as an even more affordable clean energy alternative.


Because of silicon supply constraints, companies developing technologies for replacing silicon in solar cell manufacturing are trading at premium valuation multiples. BSRC’s peer group median P/S multiple has doubled since our initial report and analysts have increased revenue and earnings estimates for these companies.

Our peer group for BSRC consists of early stage solar energy companies, as well as established players with significant interests in alternative-to- silicon technologies.


Exhibit 1: Peer comparison, September 5, 2007

Source: SEC Filings, Analyst estimates


Exhibit 2: Peer comparison, December 20, 2007

Source: SEC Filings, Analyst estimates

The improving growth prospects of solar energy companies is driving peer valuation multiples higher. Increasing P/S multiples for its peer group, combined with BSRC’s consistent progress towards commercializing its products, cause us to re-examine our price target for these shares.

BSRC is on-track to record revenues in the first six months of 2008 from the sales of bioplastic backsheets. The Company expects to finish 2008 with a sizable order backlog.


Exhibit 3: Revenue forecast

Source: SEC Filings, Analyst estimates

Assuming the most conservative scenario for both solar power deployment and market share gains resulting from BSRC’s lower price for backsheets, we derive a 2008 revenue estimate for the Company of $6.3 million. Applying a 40% premium to the peer group average P/S multiple and multiplying that number by our 2008 revenue estimate, we derive a new price target of $1.37 for BSRC shares.


Recent Developments

Plans to attain Underwriters Laboratory Certification of bioplastic backsheet for solar cells

In October 2007, BSRC announced plans to obtain Underwriters Laboratories certification for its bioplastic backsheet material. UL certification is required to sell photovoltaic modules in the US. Once this certification is obtained, the Company can commence commercial sales of its bioplastic- based backsheet film.

The Company has devised an effective strategy for fast-tracking UL certification. BSRC’s strategic partner, SBM Solar of Concord, is in the final stage of obtaining UL certification for its polymer-packaged PV module. BSRC has already submitted modules incorporating its proprietary bioplastic backsheet film to the National Renewable Laboratory (NREL) for initial testing. Assuming positive NREL results as well as similar confirmation from another environmental testing facility, SBM Solar has agreed to submit additional modules to Underwriters Laboratory for UL approval, replacing its standard backsheet material with BSRC’s proprietary bioplastic backsheet.

Successful scale-up production run of bio-based plastic film

In December 2007, the Company announced it had successfully completed a scale-up production run of bio-based plastic film. BSRC’s bio-based polymer was extruded at a full production width of 55 inches. The Company was able to produce high-quality film at this width without encountering any major scale-up problems.

This represents a key milestone in the development of BSRC’s bio-based backsheet since the 55-inch width exceeds PV industry maximum width requirements. Photovoltaic modules are expected to last for 20 years or more, and experimental modules made from this film are currently being tested to ensure the new film meets these longevity requirements. The test includes a 45-day temperature-humidity test as mandated by Underwriters Laboratories.

This successful ramp-up to full production width moves the Company one step closer to mass production and commercial sales.

Industry Outlook

Energy Demand

Electricity consumption is increasing because of economic development and population growth in emerging world economies such as India and China. Electrical demand is forecast to nearly double between 2004 and 2030 and grow 2.6% annually from 17,408 TWh to 33,750 TWh. Increased demand is most dramatic in developing nations where some two billion people have no access to electricity and addressing this need is a high priority.


Exhibit 4: Demand for electricity

Source: http://www.world-nuclear.org/info/inf16.html

With the United Nations predicting world population growth from 6.4 billion in 2004 to 8.1 billion by 2030, overall energy demand will likely to increase substantially over that period. Both population growth and higher standards of living in developing countries will drive energy demand expected to increase 53% between 2004 and 2030. The US Department of Energy predicts growth in world energy consumption approaching 71% by 2030.

Solar energy offers a clean, efficient alternative to energy produced from coal, oil or natural gas. Electricity is produced at low variable costs and solar energy does not produce carbon dioxide emissions. Despite these advantages, at present solar photovoltaic provides only about 4.0% of the world’s energy needs. World solar photovoltaic (PV) market installations reached a record high 1,744 megawatts (MW) in 2006, representing 19% growth over the previous year. An EPIA/Greenpeace report forecasts 35% annual growth in the worldwide PV market through 2009 and 26% annual growth between 2010 and 2015. This sector is poised to grow four-fold from 1.5 Gigawatts in 2005 to at least 6 Gigawatts in 2010.

Clean energy trends

Rising fossil fuel prices and environmental issues relating to greenhouse gas emissions are creating strong interest in clean energy alternatives for generating electricity.

Wind power, for example, is now one of the least expensive and most easily deployed energy sources. Ethanol has gained favor for vehicle use in both the US and abroad. Biodiesel, made from a wide range of animal and vegetable oils, is priced within striking distance of petroleum-based diesel. Solar energy competes favorably in many locations and is often the cheapest power choice in remote regions.

According to Clean Edge research, the global wind and solar markets reached $11.8 billion and $11.2 billion, respectively, in 2005, while the global market for biofuels was $15.7 billion.


Exhibit 5: Clean Energy Markets Trend, $ Billion

Source: http://www.cleanedge.com/reports-trends2006.php

Benefiting from strong federal support and multi-billion dollar investments in research and development, global clean energy markets are expected to bloom over the next decade. According to Clean Edge research, solar photovoltaics (including modules, system components, and installation) will grow from an $11.2 billion industry in 2005 to $51.1 billion by 20151. In total, revenues generated from clean energy technologies are expected to grow four-fold from $40 billion in 2005 to $167 billion within 10 years.

Biofuel refining challenges

Rising commodity prices are creating challenges for biodiesel refiners since these manufacturers rely heavily on vegetable oils as a key ingredient in renewable diesel fuel additive. Because of high soybean oil prices, construction of several biodiesel plants has halted, including the North Prairie Productions biodiesel plant in Evansville, IN. According to North Prairie Productions’ Chairman, soybean oil prices have more than doubled since planning for the new plant began.

Polysilicon supply shortages

Silicon supply constraints and high oil prices are reducing the profits of PV manufacturers who rely on polysilicon semiconductor materials despite strong demand for solar photovoltaics. BSRC’s bioplastic films and resins aren’t affected by silicon shortages, creating opportunities for BioSolar to build revenues and market share by supplying PV manufacturers with more cost-effective bioplastic backfilms, substrates and superstrates.

High oil prices

Prices for benchmark West Texas Intermediate (WTI) crude are projected to increase from an average of $66.022 per barrel in 2006 to $71.36 per barrel in 2007 and to nearly $80 per barrel in 2008. Higher oil prices make solar energy more competitive and fuel demand for BSRC’s bioplastic products.


Exhibit 6: NYMEX Crude Oil Futures Close (Front Month)

Source: http://www.wtrg.com/daily/crudeoilprice.html

1 http://www.cleanedge.com/reports-trends2006.php
2 www.eia.doe.gov/emeu/steo/pub/contents.html


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