IPG Photonics Corporation (IPGP), II-VI, Inc. (IIVI): An Industrial Play That Will Continue to Rule the Laser Industry

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It’s a well known fact that disruptive innovations take a long time before they gain acceptance on a large scale. Call it inertia or fear, industrial processes mostly use tried and tested technologies, which further extend the fertility period of disruptive businesses. One such company is IPG Photonics Corporation (NASDAQ:IPGP), which has been in business since 1990. But it is only now that the company is receiving its due attention.

IPG Photonics Corporation (NASDAQ:IPGP)

IPG Photonics Corporation (NASDAQ:IPGP) is the leading manufacturer of fiber laser and fiber amplifiers and diode lasers. Its revolutionary fiber cutting lasers perform cutting and etching tasks with great precision, and all that is done without using any consumables. Since product designs are becoming complex with constrained manufacturing budgets, the need for cost savingprecision tools is rapidly increasing.

Going great

Thanks to the recovery in the automobile and the aerospace industry, the demand for cutting, welding, and etching lasers has been increasing rapidly over the last couple of quarters. As a result, IPG Photonics Corporation (NASDAQ:IPGP) posted a 29% surge in quarterly sales from its materials processing division (which accounts for 94% of its overall revenue).

Extending its lead, IPG Photonics also manufactured the first 100 kilowatt laser, which has set an industry wide record for a high powered laser. The order was received in November last year and the swift manufacturing and delivery is another great achievement.

IPG Photonics Corporation (NASDAQ:IPGP) has also found growth even in the financially troubled countries of Europe. Its quarterly sales in the continent were up 8% year over year despite a major slowdown in the European manufacturing sector. Besides that, IPG Photonics signed an important contract with a leading automobile manufacturer in Europe which is supposedly IPG Photonics’ biggest automobile contract ever.

The company would also be revolutionizing the textile and materials industry. According to claims, IPG Photonics has developed a technology that allows welding clear-to-clear polymers which are invisible to the human eye. This development is expected to pave way for new materials and industrial fabrics, and strengthen the position of IPG Photonics in the industry.

Numbers game

Although II-VI, Inc. (NASDAQ:IIVI) and Coherent, Inc. (NASDAQ:COHR) also manufacture industrial grade lasers, a study found that the competitors of IPG Photonics lagged by up to 40% in terms of efficiency and offer 50% lower beam quality.

The fiber laser industry is being covered by several investment research firms, and a couple of popular research firms have downgraded II-VI, Inc. (NASDAQ:IIVI). Analysts feel that although the company has modest cash flows and acceptable debt levels, its ROE and operating efficiency are not at par with its peers.

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