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LDK Solar Co., Ltd. Message Board

  • ashokmit2000 ashokmit2000 Dec 20, 2007 1:22 AM Flag


    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.

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