Strong Growth Expected for Tecogen Thanks to Expanding Backlog

Tecogen Inc. (TGEN – $4.27) designs, manufactures and sells industrial and commercial CHP (Combined Heat & Power), or cogeneration, systems that produce combinations of electricity, hot water, and air conditioning. Tecogen is a well-established company, as it has already shipped over 2,300 units so far, some of which have been operating for almost 25 years.

Tecogen’s sales team had some notable wins in the past quarter and is making material progress on building lasting relationships with partners that produce long term repeat business for the Company. Consequently, Tecogen’s backlog stands at an impressive $15.9 million. The installation of all these units will result in strong revenue growth in coming quarters.

In May 2016, Tecogen formed a 50/50 joint venture corporation with the Czech CHP manufacturer TEDOM. The JV, coined TTcogen LLC, offers a complete package of 27 different CHP modules ranging in size from 35 kW up to 4 MW, making it the premier packaged CHP provider in the United States. Thanks to the much expanded offering, TTcogen is quadrupling Tecogen’s addressable market for CHP. Only a few weeks after the formation of the JV the first sales have been booked and more are in the pipeline.

These are also very exciting times for Ultratek, another 50/50 joint venture, which was formed to test, verify and develop the Company’s Ultera near-zero emissions technology for vehicular applications.

Initial tests on a gasoline powered light duty vehicle conclusively proved the Ultera technology to be highly effective in reducing pollutants. Top level findings showed the cutting-edge system reduced levels of carbon monoxide emitted by as much as 90 percent, and cut non-methane hydrocarbons (NMOG) by as much as 80 percent in excess of current available technology. Phase II tests are now ongoing. If successful, Ultratek may become the gigantic icing on Tecogen’s cake.

Based on the intrinsic value of Tecogen’s shares derived from our model, we reiterate our buy recommendation for Tecogen Inc. with a price target of $8.97, which is 110% above today’s stock price.

Download the second quarter 2016 Tecogen Inc. Company Report. Download Advice: BuyPrice Target: $9.41Latest Company Report (pdf)
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