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LDK Solar Co., Ltd. Message Board

  • phreecash phreecash Dec 30, 2012 5:01 PM Flag

    Comments by Phree

    I have come to the conclusion LDK has legs....
    On one hand, a stock value is that which collectively investors deem a consensus.

    For many of you, some note some unusual maths, foreign to most as I venture into the Tensor Calculus. I assure you it has purpose. While the math is not adept at determining your thoughts collectively tomorrow, it is adept at determining certain things and weights you place on certain attributes.

    I would like to say, based on what I see, collectively – most deem LDK poorly. Like a two edged sword, that consensus allows for opportunity should LDK survive. For the last year, the continual exit of investors have left LDK in a position of a low of 67 cents. One asks, why the jump.

    After considerable reflection, I would say the pledge of China support – Subsidies, Poly Tariffs, Opening of the grid. It all matters.

    What you are blind to is relative valuations. When I say LDK has legs, I mean just this... that it is when viewed as a viable contender with its peers, still severely price depressed and so it has a way to go. It explains 10% upside movements. Sure – there are some that look at net margins, metrics like I did, and on first take, presume fair value. But, write downs that migrated into net distorts data and the net no longer reflects costs internal to LDK. Additionally, no single attribute can be considered the whole side of the equation.

    Devils advocate says that although I may have included many other parametric data, I could not have accounted for everything – and you would be right. Stock prediction is perhaps more art than science, luck than deduction. Fair enough. But what I say has basis. That alone should cause concern.

    It appears to me, 13'Q1 should bear fruit. There is a commitment for a determination relating to Poly Tariffs. The EU region is re-surging ahead of FIT cuts. Shares exchanged for LDK to State owned enterprises did not result in dilution, effectively making insider owned shares higher. Not all is as bad as portrayed. Finally, Xinyu's resolve. I cannot fathom Beijing letting LDK fail since so many feeder companies would be impacted. If Jobs are a concern of China... the Aircraft Carrier LDK would be a disaster if it sunk, decimating jobs, worse, localizing it such that Xinyu herself would blow away with the unemployed relocating. It is a Detroit sister city if that were to occur. Everybody hates Detroit, and unlike our dysfunctional political system, China's works and has so as evident by the fiscal surplus.

    With all coming together, there is the seasonal factor. Northern population centers far outweigh southern. Demand is centered / synced with USA UK Spain Italy China Japan.... You know it.

    Finally, certain trending suggest a generally uptrend, notable on 30 day charts. Investors place significance to the 30 and 90 day trends. Like mile markers on a highway, we passed a critical juncture. Trendlines intact, despite 4:00PM torpedos, indicate legs. Presuming the torpedo launchers deem launching of torpedos costly... I presume the assult is over. Crazy Ivan's can be self destructive.

    The only case for concern is a global one... fiscal cliff and a spooked market. But that too is evident from I believe 5 days of sell off. If even the subtlest solution is reached in Washington, the market already spooked should rebound. Including LDK.

    Have a great day.

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    • What a wonderful diatribe. Let us get back to reality.

      LDK MW shipped is falling.
      The selling of modules amounts is 50- 80MW as guided by LDK.
      Wafer shipments are guided to 200-250MW.
      Revenues expected $230-290M primary variance is projects as modules and wafers are set to be around $110-120M of the revenues as guided.

      The Poly plant is effectively shut down per the last con call and not expected to be operational until mid year 2013 as they appear to need cash to finish the plants.

      Inventories are $312M. If I am not mistaken this is inventory for production and does not include project inventory.
      Your comments regarding cost competativeness appears misplaced.

      LDK has over 4GW of wafer capacity some 2GW of cell capacity and if you believe them 3.2GW of module capacity and well as 18,000MT of Poly capacity that is for the most part idle or non competitive in cost structures.
      Depreciation costs runs roughly $92.5M per quarter. This is an ingrained costs. With no Poly production and MW in the 300MW range during what is normally peak shipments for the year. The costs ingrained at these levels is over $0.30 per watt. At peak utilizations this cost is $0.056 based on 1600MW vertical. This is slightly above peers costs of depreciation of around $0.04.

      Interest payments currently run $65M+ or another $0.20 costs at current levels. At peak levels of capacity, this is $0.10 in interest alone. Most competitors TSL JKS SOL are at $0.025 +/- in interests payments.

      That puts LDK costs at $0.50 per watt today before manufacturing anything. That is on products that ¾ are guided to be sold at around $0.25/watt. The rest will likely be sold at $0.60 to $0.65

      I will give you that their costs for Poly when running full production would be around $18/KG. The problem is that they do not have 25KMT and have never had 25KMT. They are not producing at full capacity or even ½ capacity . You will likely be looking at 2 years out for full production at the $20-$22/kg costs that will include around $7-$8/kg in deprecation costs or costs that are roughly 20% higher than peer wafer companies that produce their own Poly.

      Capacity is 4.2GW for wafers.
      Capacity is 1600MW for Cells
      Capacity for modules is what 3GW as claimed?

      They will be underutilizing the equipment by greater than 50% for as far as the eyes can see.

      That is why the company has announced plans of debt forgiveness for assets. The problems are that the debt forgiveness will not be a 1 for 1 more likely 50 to 80 cents on the dollar. And most if this is not for accrued debts that are their loans, rather it is for owed debts that is starting to push $2Billion dollars in AP and accrued expenses and other payables.

      While LDK is getting a small bounce (a whopping $0.70 rise off the bottom) they will not run with the current businesss environment deterioration and losses that will continue to occur due to underutilizations and current debts.

      It is just a matter of time before LDK has negative equity which is a technically bankrupt in the US. That is unless they dilute again. They sold 25% of the company for $20M not long ago.

      Oh look not a comment regarding gross margins, just costs debts assets and current and future business as it stands, of which you touched on none of it.

      • 1 Reply to twoheadedsnake1234
      • Basically LDK a cost structure now of $95M in depreciations, $40-$45M in labor costs and around $75M in interest payments. They basically have a built in cost of $200-$215M before they even attempt to make a product.

        So all the talk about LDK cost parity with others has to be tempered with outdated over priced and idle capacity. compounded with interest payments that are triple to quadruple the industry average under loaded capacity.