$240M when they are shipping $500M of product is not bad. That is a 24 times inventory turn on a year. If you figure shipments in transit is 30% to US and Europe and other regions that is not considered sales as of yet, then you have another $100M of that $240M as in transit.
CSIQ and Jaso both exceeded guidance. SOL and YGE missed guidance and both has lowered anual shipments guidance. Trina, barely made low end guidance. The tariffs are having more of an impact than they want to admit.
makes you wonder how their GM climbed so much when they have the worst depreciation per watt vs peers.
Between 2020 and 2025 demand should grow at a 10% annual growth. If you start from a 108MW demand from the 15% growth, the market segment is 175GW. Add in the need to replace 10GW or more per year starting around 2020 you have a market segment approaching 200GW .
The cost to manufacture has fallen significantly over the past 7 years. The rate of decline has slowed over the past year. The costs are now in the $0.45 range for the most efficient producers. With Poly production costs targeted to drop to under $10/kg and grams usage dropping with efficiency gains, there is room for cost recovery of $0.04 from todays costs of around $0.10 per watt from Poly alone. There should be other cost reductions as well. These could shave another $0.04 to $0.06 off the costs to produce. A 10% increase in power would be a near direct $0.036 cost saving. Lower costs for glass and silver usage and the cost could fall $0.05-$0.06 cents. Module costs would fall to $0.36 or less for all in production by 2020. If you look at this cost reduction #$%$ a year a module in 2014 costing $0.46 would cost to make at $0.338.
With the higher ouputs balance of systems should drop to $0.50 or less and all in costs would be under $1. With finance systems cost come in at $1.20 . The cost to generate falls to $0.04 loaded. That is a near 50% decrease in the cost to generate from today and places it firmly as the energy of choice. At that price storage as an add on becomes affordable and solar is still cost competitive.
Like I have stated, I have been investing in solar for the past 8 years, this is my view on the next 10 years based on reasonable market presumptions and cost points. There will be some ups and downs and some regions these models do not match but in general around the globe that is where it is headed. Enjoy the next 10 years.
Way to much emphasis in the QnA on projects and yieldocs instead of their core business of modules. That seems to be a trend of asking about very slow growth revenue streams as the China projects are not for sale but for owning.
The only real negative I see is that with growth is the need for capacity. JKS is constrained today and lost out on what they thought they were getting for new cheep capacity. Since then with the demand the reports are that most of the idle capacity is now started back up and the cost to aquire the capacity has doubled or tripled. It is not almost more expensive to by fully functioning capacity than it is to build new capacity.
Yes I actually liked the con call. The results were a little disappointing on the low end and modules shipped to projects but everything is on target as they guided at the start of the year and adjusted up in the middle of the year.
The Q4 guidance is rather bullish as operationally margins should be increasing with volume shipments as well. This should push profits from operations ahead. The guidance of another 20-25% growth for 2015 places them at near 3GW in shipments along with what could be $120M in project revenues and $40M+ net from that alone. If they are operating today at near $1 in EPS in Q4 based on 750MW, then 2015 could be looking very nice as that is the average expected volume.
Here is a 5 and 10 year view
Some History. I started investing in solar in 2007. That is 8 years of following solars. Demand was less than 5 GW that year in 07 in 08 it was 5.8GW. The cost to produce a wafer was $2.40/watt and modules cost $5/watt. In 8 years the demand has gone up 8 fold while costs have fallen 80-90%. That pace of growth and cost cutting is not sustainable as is any industry generally as mass production increases growth as a % decreases. However industries do generally decrease costs over time as efficiency and technology improves.
So where does the market segment grow and where do cost potentially fall in to justify the growth?
Power Costs: In many countries solar is being installed for $1.30-$1.50 per watt. That is a cost of appx $0.045 per Kwhr. With finance that runs around $0.06/KWhr. That is on par with some of the best power production costs for energy around and money can be made selling it both wholesale and retail.
Market size : The market has been growing consistently over the past 5 years at 6-8GW annually. It is forcast to grow at 15% annually for the near future. At current target of 47GW in 2014 and an added growth of 42GW over the next 6 years, the install rate by 2020 is 90GW. At 8GW as the growth is approximately in 2014 and is estimated in 2015 you add 48GW. That places the market at 96GW in 2020. At a 15% growth rate some suggested year over year through 2020 the market becomes 110GW.
Sleeper demand: India has a current target of 15 GW installed by 2019. They are at 3GW today. They are now discussing a path to 100GW by 2022 or so. That means India by themselves could be targeting 20-30GW of capacity annually come the year 2020. A 15% growth would target them at around 7GW in 6 years. There is a miss in the numbers of potential 15-25GW in annual demand.
WS is giving higher valuations to US companies and not foreign entities from China that tapped the US Financial markets. Yieldco are where WS sees a windfall for revenue streams. WS ibenefits from the brokering fees they will get in the pairing of the investors with the solar companies. It is a potentially HUGE market for WS over the next decade with Billions in fees to be made. That is the only reason WS likes companies with Yieldco that I see.
Yes the power business is a long term build out with little revenue recognition up front. You saw peek revenue from 252MW generating roughly $11M. Gross is ~60% but net is around 30%. So for the buildout of the past 1.5 years, they now generate $9-$12M per 250MW. Next year stating at 800MW they generate revenues in the range of $27-$40M per quater and gross of $14-$24M. Not to much of an overall impact to the revenues or net profits quarterly.
As far as yieldcos valuation, the $500M vaue is debateable but they have already sold half of the ownership or near half for $225M or so. if you look at FIT driven profits of 6 cents per KWHR, the 800MW has $1.45B in profits. When selling the yieldco, the investors are going to want a rate of return of 5% or more. That means every dollar invested they want $1 returned.A cost to build of 1.30/watt is $1Billion on 800MW. That leaves an inherent value in the $400M range, could be as you said $500M . Half the difference is profit from sale as the other half goes to Rate of return. Thus the value may only be $250M or what they sold half the share for. Their 30% investment in the proejcts to date has now been returned with the partnership sale. There may only be another $125M left int he bank for them. That was a 6 cent FIT. there could be an additional$0.04 per watt profit additional as the cost to generate is $0.04-$0.05. Again selling that profit potential is 50% as the rate of return eats that. So there is another $450-$500M in added share value of which half is sold to a third party. So they get a total of $225+$125+$225 = $575 + their initial cash investments returned.
just rough numbers
They are not a SUNE and will not be a SUNE as the primary market for SUNE is the US. JKS is big in China.
They were the first solar not to beat shipments guidance. Because of this their revenue and earnings came in a little below consensus. The guidance for Q4 is reasonable not great with a 11 to 17% increase in shipments to 3rd parties. They indicated midrange GM guidance above Q3 reported GM. . They re-iterated a strong Q4 for completed projects. This all suggests that earnings should increase and be approaching $1 for Q4.
The negative, this is the second straight quarter where they were at the low end of third party shipments for guidance. First quarter they were right in the mid range of guidance.The past 3 quarters they have been midrange or below for stated shipments. That should bias downside the guidance for Q4 shipments to the 730-750MW range.
I am looking for 22.8% GM in Q4.
exactly, if margins are stagnant to declining, there will be slight earnings growth with 20% increase in sales volume. Not much to hang your hat on. This is a slim margins business with most in the 15% range and the best in the 20% range. When dealing with net profits in the 3-5% range for most, a 2 to 3% drop in margins all but wipes out the profit growth from increased sales.
I think you might be confusing my comments on LDK and YGE with my comments on CSIQ. I had stated back in Oct/Nov that JKS Trina and CSIQ would turn profitable in 2013. Generally expect the break even or profits to be primarily in the second half for most. But with respect to CSIQ, this is exactly what I stated in early Nov and I made similar comments earlier. So if you call that negative feel free. I made similar forcast comments in 2013 time frame for 2014. I trust my numbers more than words of others.
“The key is projects. They are making very nice movement int hat area compared to peers.
They identified several projects for revenues potentiall being $1.2B in 2013 They expect project revenues to be in excess of 50% of the revenues for 2013. Atleast some of the projects that are selling in Q1 are gaining 25% GM. If they recognize $1B in projects, they could be looking at $200-$250M in gross profits. Add $0.05 per watt avg gross or 7.7% GM in 2013 for 900MW they gain another $45. Gross profits could be around $250-$300M. At a burn of $40-45M per Q that is Opex of $160-$180M. Add interest at $17M per Q or $64. Total expenses are target of $224-$244. This sets CSIQ up for potential gross of $5M-$75. Avg estimate would be $35M or $25M after tax. “
For your reference, this is what they actually did in 2013
Gross profits actual $275.6( 0.6 mill off my midrange estimate)
Net profit Actual $31,658 (2$3.4Mill off my stated average and I do not include forex in those)
As for the ride, I was in 4 stocks during the runup as I turned bullish well ahead of the trend.
just got Johnsoned? They were at $40+ around Q1 Er they were at $37 around W2 they were around $32 around Q3.
do you see a trend? Johnsoned may be a day or a week but this is a years pattern.