Suntech Power (STP) is out this morning with a decent quarter - people will say its a "good quarter" or a "great quarter" - I disagree - at this point I cannot trust management to forecast anything because they "beat" by such a wide margin (especially on revenue) after disappointing so badly last quarter, yet guiding revenue far lower. How they
continuously are unable to forecast 90 days out is a mystery to me - in fact it is NOT even 90 days out - they report half way through the quarter so when they issue guidance that means there are about 45 days left in the quarter - yet they constantly miss by a lot (either up or down). This shows me a company that has poor internal forecasting, and over time if this continues the Street will punish them. And it's not a matter of sand bagging because some quarters they beat by a lot, and some quarters they miss by a lot - no consistency. The Street likes predictability. Just my opinion. Further they are still banking on a boffo 2nd half of 2008 to make their full year number; still a lot of risk to that scenario. While their size and scale should help them in the long run, I am frankly tired of their inability to come anywhere near to their guidance in any quarter.
- Total net revenues for the first quarter of 2008 were $434.5 million, representing an increase of 76.1% from the corresponding period in 2007.
- Non-GAAP gross margin for the Company's core wafer-to-module business was 23.3% and non-GAAP consolidated gross margin was 22.5%. The gross margin increased from the fourth quarter of 2007 primarily due to an increase in the average selling price driven by strong demand for Suntech's solar products, which was partly offset by increased silicon wafer costs.
- Non-GAAP net income for the first quarter of 2008 was $60.6 million, an increase of 85.2% year-over-year, or $0.35 per non-GAAP diluted ADS.
That said, I am more bullish on the prospects for
Trina Solar (TSL) after seeing all the other earnings reports in the sector. Even the worst of breed are beating expectations since a lot of trends in the sector seem to have improved this quarter. Yesterday I took a 2%+ allocation in
Trina off the table to protect gains in case STP disappointed [
Bookkeeping: Cutting some Trina Solar on Solarfun beat and Suntech Power Earnings Tomorrow], so with Trina's stock down about 6% from that selling point, I am going to add part of yesterday's sale back. I would add more if I believe in the market overall, or the solar sector had not run so much and was due for a pullback. Unfortunately for
Trina they are probably going to be reporting earnings into a sector sell off - so I am not going to get the position back up to what it was. I do believe they will do very well this quarter but could be a victim of timing; or better said, if
Trina Solar traded in an absolute vacuum I'd be willing to make this an even larger position. This sector is ripe for a major pullback unfortunately.
That said, I'm adding back here in the mid $48s to $49 and taking the position back up to
5.4% of portfolio. (up from 4.6% going into the day) I'll potentially add more on a pullback to $46 area. I believe fair value is far, far higher, although these names trade together so if the sector sells of, fair value will mean nothing to the speculators who run in and out of this sector. If there were less speculators and more investors in this space,
Trina's stock price would be far higher. This continues to be a large, missed opportunity by the Street in my opinion. We'll see what earnings holds in the coming weeks.
EDIT to post around Noon-ish: I wrote I'd add more on pullback to $46 area so I have done so - new allocation is back up to
7.2%. If not for general nervousness about market, I'd be closer to 8-9% allocation. This is now the best value in my universe. Period.
Long Trina Solar in fund and personal account
7 comments:
Funny that you have this idea, I did the exact same thing for my virtual portfolio...if STP and SOLF can beat easily and showed strong ASP's how can TSL not beat by a great margin.
The fact that TSL is down today may be a gift if they beat and the solar sector doesn't just sell off
The fact TSL trades at 50% discount to peers is beyond me. They not only had the best Q last time around, they probably will have the best 2nd half (along with YGE). Oh well, inefficiencies let us make money. The only problem is they are so late to report - the whole sector has run up and is prone for correction - which in solar many times means 20-35% losses.
Industry conditions as a whole are only improving...I remember thoroughly reading through analyst research reports in December which said poly/ASP scenarios and outlined the "bullish" case is if oil goes to 100....well now its at 130, say at least 120 after a correction (nice short with DUG btw) so is this the super-de-duper bullish scenario?
ASP's will hold better because alternative energy is NEEDED and SOLF had strong ASP's and poly will be coming down.
While this occurs, TSL's efficiencies for cells keeps improving making all costs/watt plunge if all else is equal (which is isn't, ASP's are holding, costs are declining for POLY) Overall, this is bullish for the industry in general but the fact that TSL is 50% discounted, means it should double just to catch up, then advance say another 30% because of favorable industry conditions and higher industry earnings.
currently TSL around $48
TSL- 08 EPS estimate- about $3
that means the multiple is around 16
It should be more like $3.50 EPS and a multiple more like 25 like STP or SOLF
(traderbill)
Do you know when TSL will report its earning? Thx!
per website it should be in the next 2 weeks. They report very late into the quarter traditionally.
I saw this news and wonder if these new companies will pose threat to the current players?
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Signet Solar Rolls Out Industry's Largest Silicon Thin Film Solar Photovoltaic ModulesLast update: 5/23/2008 3:34:01 PMIndustry-Leading Gen 8.5 Modules Manufactured in Record 10 Months from Start of Construction MENLO PARK, Calif., May 23, 2008 (BUSINESS WIRE) -- Signet Solar, a manufacturer of silicon thin film photovoltaic (PV) modules, today, announced the fabrication of the industry's first ever Gen 8.5 (5.7 m(2)) silicon thin film solar PV module at its new factory near Dresden, Germany in a record setting ten months from the start of construction. After finishing construction of the 200,000 square foot production facility in only seven months, Signet Solar completed installation of equipment and started initial fabrication in less than three months. Signet Solar's technology lowers the cost of photovoltaic (PV) modules by combining proven silicon thin film technology, with very large area manufacturing and an industry standard equipment set. The initial modules from the fully automated module manufacturing line met the specification of the product and were confirmed by independent testing by Fraunhofer Institute. Signet will start prototype production in early June and will showcase the Gen 8.5 module product line at the Intersolar Conference in Munich. This flawless execution was enabled by Signet Solar's core competency in semiconductor manufacturing along with added expertise from the solar, glass and flat panel display industry. Commercial production will start in Q3 2008 and capacity expansion to over 100MW by 2009 is planned at the same site. Signet has existing customer commitments of over $400M. Signet Solar will continue to aggressively increase capacity globally to become the technology and cost leader in silicon thin film module manufacturing. "The concept of ultra-large modules was very attractive to our customers. We now have demonstrated the capability to produce ultra-large modules on a fully integrated line," said Dr. Rajeeva Lahri, CEO and Founder of Signet Solar Inc. "This is a very important milestone for us as it sets the stage for a model manufacturing line which will be replicated globally to expand capacity." Through partnerships with proven equipment suppliers, solar PV solution providers and energy producers, Signet is positioned to be the leader in thin-film photovoltaic module production and delivery. The applications of Signet Solar products include: solar farms, large commercial installations, building integrated photovoltaics (BIPV), and remote habitation. About Signet Solar Signet Solar, Inc. is a global company established in 2006 to bring Clean Affordable Renewable Energy(TM) to people and countries worldwide. Headquartered in Menlo Park, California, the company has been founded to design, develop, manufacture and market thin film silicon photovoltaic modules. For more information please visit . Signet Solar and Clean Affordable Renewable Energy are trademarks of Signet Solar, Inc. in the United States and other countries. SOURCE: Signet Solar, Inc.
Signet SolarSanjay Arora, +1-650-289-0399 ext. 224sarora@signetsolar.com
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Cheers....
Thanks, sounds interesting - if it IPOs in US might open at $5000? $10,000? hah to catch up to First Solar.
Going to be a ton of competition in this group as its a commodity - easy barriers to entry. But considering solar makes up say 0.2% of all world energy - if it can get to 3-5% there should be a lot of growth in the future. Which companies enjoy that growth is an open question. I expect many consolidations and closings over the coming half decade.
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