Western Europe, Japan, the Middle East, now India... meanwhile the US Congress continues to subsidize oil companies and laugh off solar... we continue to fall behind the global competition by the day. At least California is trying...
Judging by the nearly 10% move after hours in this name, my "breakout" target of $31 appears in the bag.... I will be adding first thing tomorrow morning on this price action... should bode well for the entire sector...
I've added today in the $29s and taken the exposure back up to 1.2%. A move above $31, and I'll add in size.
- LDK Solar Co., Ltd. (NYSE: LDK), a leading manufacturer of multicrystalline solar wafers, today announced that it has signed a ten-year contract which is a blend of "Take or Pay" linked with market-based pricing to supply multicrystalline solar wafers to India-based Moser Baer Photo Voltaic Limited (MBPV), a subsidiary of Moser Baer India Limited (MBI).
- Under the terms of the agreement, LDK Solar will deliver 640 MW of multicrystalline solar wafers to MBPV over a ten-year period commencing in mid 2008 through 2017. MBPV will make a suitable advance payment reflecting the contract value to LDK Solar.
- "The supply agreement with Moser Baer reflects the strong interest we continue to encounter for our high quality solar wafers," stated Xiaofeng Peng, Chairman and CEO. "We are excited to extend our business into an emerging market such as India, as we continue to diversify our market coverage and grow our customer list."
Long LDK Solar in fund and personal account
6 comments:
Mark, congrats on LDK. lucky vs being good? maybe.. perhaps, fortune favors the prepared.
I've never seriously looked at the solar business (fyi - i work in the power business) because the cost per mwh seems to prohibitive. But the one serious advantage is the ability to create smaller generating pockets in a distributed fashion, with lower (in terms of absolute value) capital costs. (ie like wind turbines) Isn't the solar business highly commoditized, just like Ag, etc, etc? If that's the case, what are you using to estimate the current value per mwh? How are you valuing these businesses? I can see the trend, but should ever the whole coal debate get resolved, regardless of the outcome, I think solar becomes alot less attractive. Even with GHG technology, I think the cost is less than solar. Its the uncertainty that is axing all of the major power plant deals.
Hi Jeff,
boy I could get into a 50 page thesis on how to value these things. There are so many moving parts. I got into solar very late in 2006, and it was an easy ride up til late spring/early summer 2007 or so when all the speculation really went crazy. It now reminds me of ag in some ways.
I think ag has higher barriers to entry (not the crops but the potash fertilizer).
Multiple issues
input costs
subsidies
when does grid parity arise? (some news out today at solar conference pushing for 2010 - I find that aggressive but even 2012 would be huge)
does pricing drive demand or does demand drive pricing (chicken and egg?)
low barriers to entry
huge period of consolidation coming
etc etc etc
Right now the market is not differentiating between one or the other much. Only FSLR due to a different technology (that avoids the input cost issues in the sector) gets a huge premium to the group. But that could reverse within 2 years 180 degrees. At this point the herd moves these stocks together. There are 10 public players and probably another 100 private. I expect a blood bath of consolidation and whomever emerges is going to have a great opportunity. I truly believe when the winners are left in 2012+ (5-8 global giants in my book) those will be some great investments. But between now and then is tricky. But investors don't care - they have very simplistic assumptions i.e. solar is only 0.001% of world energy, just imagine if it gets to 10% and they buy everything.
very similar to the internet shakeout. I have a lot of pieces on solar from last fall and earlier in winter, including pros and cons some very long pieces so you can search through archives on solar and read through. It is actually the most difficult sector in many ways because of the myriad moving parts but in some ways the simplest sector because investors buy the momentum stocks in this sector ... a great dichotomy. As a relative value investor I am always left behind in this sector as people chase up some of the worst of breed to crazy heights (due to momentum) while the values sit there dead sometimes :)
Ok.. my thoughts on the barriers to entry are similar.. however, all of the demand is from europe, which has high emissions costs. The traded market there is fairly mature, which makes pricing the cost per mwh much more predictable. In the US, preliminary estimates suggest that they would not nearly be as aggressive in terms of compliance costs for coal. but there is a serious lack of certainty... definately not to be resolved this year. In a way, I think europe indirectly subsidizes far more than the US does. (to end this year)
And you're right.. the sector seems really fragmented, which is why I think its a commoditized business, unlike potash, which is more like a happy cartel.
I'm not sure how much non-europe solar demand there is, but i dont think there's much. Correct me if I'm wrong here. And power demand in europe isnt likely to grow nearly as robust as it is, in places like india or China, which I would imagine would consider technology like nuclear.
Input costs - I think they'll be heading down this year, which is a positive.
You lucky bastard!! Great call. I need solar exposure and will look to get into one of these guys next big drop. Knock on wood.
-BD
Congrats Mark!!!
after reading your piece on LDK, I went and checked my AMTD streamer which is still open from todays trades and includes afterhours action. I plugged in some solar names and here's what it shows:
STP +15%
TSL +17%
LDK +21%
all from yest close.
LDK last at 33.30.
Still gonna chase the open? I'd say after the huge runs the last few weeks in solar, we are mayhap approaching a short-term "LaBubble" time...
jeffrey, my concern is more with the overall market and bad report tomorrow, rather than anything LDK specific. LDK could be $40 in a blink of an eye - check the charts from 2007 to see how this one moves when it gets momentum behind it. Either way its not expensive at $31, $33, or $37 for that matter. But if the market tanks on a return of economic fears any purchase today will look poor. But I can't predict the market gyrations daily, only pick solid stocks.
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