UBS Investment Research
LDK Solar Co Ltd
S trong showing in Q307 results
Q307 results in line
LDK reported revenues of US$158.7m, up 60% QoQ, and 6% higher than our
estimate. Net profit was US$41.6m, up 55% QoQ but 3% lower than our estimate.
The lower-than-expected net profit was due to a US$2m foreign exchange loss as a
result of the weakening US dollar. Q307 gross margin was 30.8%, down 4.4%
QoQ. This was primarily due to higher polysilicon costs and purchase of monocrystalline
ingots for wafer slicing, to increase revenue and profits.
We lowered our 2008 and 2009 estimates
We lowered our 2008 gross margin forecast from 30% to 27% to be in line with the
company�s guidance of 25-30%. We also adjusted our 2009 polysilicon production
costs from US$35/kg to US$50/kg, as we now believe the company might take
until 2010, rather than our previous forecast of 2009, to optimise the operation of
the polysilicon plant.
Operational improvements going on well
LDK has upgraded its ingot furnace capacity 15%, from 270kg ingots to 450kg. It
has commenced shipping of 180�m sample wafers to customers. Its 15,000t
integrated TCS-polysilicon plant is on schedule and is expected to be completed
with 6,000t by end�2008 and 15,000t by end�2009. We expect the successful
completion of this plant will add to LDK�s competitiveness.
Valuation: maintain Buy rating and price target of US$71
We base our valuation on DCF analysis. We assume a 10.6% WACC, after-tax
cost of debt of 4.7%, 5% risk-free rate and 5% equity risk premium. Our price
target implies 9.7x our 2009 EPS, about a 50% discount to REC�s and MEMC�s
multiples of 19-20x.
it wil be intersting day tom....wanna see how low it can go....i was expecting something like this so i boughts some put todays for insurance...i post a note in here to people to buy safety net/ puts.i am glad i did that.if this go to 55 or lower watch out for bounce back.dont expect 75 for next two weeks atleast unless we get some good news from company or upgrade. i still got my jan calls
i bought puts this morning and posted my reasons as well.
no one seems to care.
it seems that this board is full of bulls,
so stubborn that bulls turn into pigs.
there is no long side or short side in ws.
there is only the right side. which side
do you want to be?
Hi, great post!
I was just wondering, why is LDK traded at such a huge discount to WFR and REC PE ratio? They seem to have much higher growth potential than those two companies. However, just wrote my investments final today, and according to textbook theory...LDK is much riskier, and do they don't really seem to have more profitable investment opportunities since they all make wafers, right?
I need of some enlightenment.
Highlights (US$m) 12/05 12/06 12/07E 12/08E 12/09E
Revenues - 105 511 1,137 1,671
EBIT (UBS) - 37 149 250 917
Net Income (UBS) - 29 149 220 827
EPS (UBS, US$) - 0.26 1.31 1.94 7.30
Net DPS (UBS, US$) - 0.00 0.00 0.00 0.00
Profitability & Valuation 5-yr hist av. 12/06 12/07E 12/08E 12/09E
EBIT margin % - 35.2 29.2 22.0 54.9
ROIC (EBIT) % - 36.5 36.8 27.5 54.2
EV/EBITDA (core) x - - 42.4 23.9 7.2
PE (UBS) x - - 50.4 34.0 9.1
Net dividend yield % - - 0.0 0.0 0.0
Source: Company accounts, Thomson Financial, UBS estimates. (UBS) valuations are stated before goodwill, exceptionals and other special items.
Valuations: based on an average share price that year, (E): based on a share price of US$66.11 on 20 Dec 2007 12:33 HKT