UPDATE:    Since our original story in late 2009,  GCHT has drifted in the $2.30 – $2.50 range under light trading.  Today, however, the stock is up 15% on no recent news other than the fact it is presenting in 1 week at the Needham Growth Stock Conference on January, 14th.    Perhaps interest is gathering ahead of the conference or pending news is coming.

GC China Turbine (GCHT.OB) is a manufacturer of efficient 2-bladed wind turbines based in Wuhan, China . The Company holds a license to manufacture these 2 bladed turbines which meet rigorous requirements for low-cost and high reliability. The technology was developed through a 10 year European R&D effort costing in excess of $75 million dollars.   They recently launched  a 1.0 megawatt (“MW”) utility scale turbine with designs for a 2.3MW and 3.0MW utility scale turbine in development. The Company’s initial efforts have been rewarded with contracts of approximately US$128 million to-date and realistic potential for an additional $200-$400 million in additional contracts in the next 12-18th months.    The deployment savings for the 2 blade turbine vs the traditional 3 blade turbine are signficant as listed below.

At approximately a $2200 savings,  a large wind farm could see savings in the hundreds of thousands of dollars.  In addition, the units yield a 3% uptime advantage over their 3 blade counterparts yielding additional revenue in the tens of thousands of dollars per year.

The company has recently engaged Deloitte & Touche Tomahatsu as their new independent registered public accounting firm to audit the Company’s financial statements for the fiscal year ending December 31, 2009. For a small firm such as GCHT,  getting a world class auditor to validate their financials will pave the way to a listing on an exchange such as the Nasdaq Global Select Market and off the bulletin boards.   If you are unsure the relevance of such a move,  look at companies such as Gulf Resources (GFRE) to see the potential impact.   Gulf Resources,  also a public company based in China,  rocketed more than 400% on the news.  But GCHT doesn’t need hype to move its stock price,   ultimately, it will need traction in its marketplace.   If we assume that existing business trends continue for GCHT,   a revenue figure of $275-300 million for the next 12 months seems like a conservative estimate.    Given the price to sales ratio of 2 inline with its peers such as A Power Energy Limited (APWR),  that gives the stock a potential market cap of approximately $600 million or about 3.15 times its current market cap.    Consequently,  a price of $9-11 is a reasonable valuation for GC China Turbine based on these parameters.    With the current price around $2.85,  the stock looks very attractive.    The chart below shows that GCHT recently dipped below its 10 day moving average but it has bounced back through resistance each time it has done so before.  In addition, the stock is currently at the lower end of the Bollinger band and could be poised for a rebound back to the mid 3’s in the short term.   Be careful however that this is a lightly traded micro cap stock and typically exhibits greater volatility than its industry peers

Company Website : http://gccturbine.com

Author’s disclosure: long small position in GCHT