I thought that Zoltek presented a compelling investment opportunity, even at its high price, because of the potential of carbon fiber technology in the auto industry and other sectors. It looks like Toray Industries agreed with me, and this Japanese industrial conglomerate looks like it is clearly the leader in the carbon fiber industry right now. With that said, there may still be another opportunity to invest in this technology. Hexcel has also been working on carbon fiber auto parts.
A major acquisition just changed the landscape in the carbon fiber sector. The Japanese industrial conglomerate Toray Industries has just bought Zoltek for $584 million. With this deal, the industry has become more consolidated; indeed, the Zoltek acquisition follows another purchase by Toray Industries. In July, Toray Industries bought 20% of Plasan Carbon Composites, which makes carbon fiber reinforced auto parts. Zoltek announced that it was working with auto companies in its last earnings release before the acquisition, so Toray Industries has now bought two companies involved with the carbon fiber auto parts industry this year.
Hexcel has already demonstrated that carbon fiber parts can make a car perform better. The BMW i3 shows that carbon fiber parts can be cheap enough for mass production. Toray's acquisitions also bolster the case for investing in this market, as this conglomerate seems confident about the industry. Prices may need to come down further for wider adoption, but Hexcel will benefit from sales to companies like Boeing in the meantime. Note that Hexcel is highly regarded among Fools (it has a five-star CAPS rating), and a forward P/E of 18 is not that high for a company that owns a disruptive technology. Carbon fiber auto parts provide another reason for confidence in Hexcel's performance over the long term.