pipe dreaming. earnings should be similar to Q3 in the second half could have slight bump up but not much. 2015 is being setup for the year of the projects that may add $40-$50M gross.
There is nothing shocking regarding the con call.
Their margins as most are in the ~15% range with limited ability to decrease costs similar to most companies.
The cost decreases will be offset most likely by the increase in Chinese shipments.
Their projects should not be looked at for this year. You might get a gross of 15% on the plant sale of 100MW if it happens in 2014.
They expect wafer prices to drop from Q2 levels by 1-2 cents. They also expect in Q3 China ASP to drop from $0.58 in Q2 to $0.56 in Q3 and maybe rise a penny in Q4. The drop in wafer ASP should offset ASP drop in modules.
As most solars, flat to slight ASP declines with increased volumes should keep earnings around where Q2 was.
15% GM +/- appears to be the new norm for most that rely heavily on China.
Margins are industry average. With margins flat the only way to grow is to increase shipments. And they made money. Just not enough money.....
Yes if you listened to the SOL con call, Cell ASP has collapsed in Taiwan. That means that artificially high ASP support for cells enjoyed by JASO now has serious competition and downside pressures. They will not be selling at $0.37 blended any more. Drop those margins down 10%, they suddenly become 4-5% gross margins going forward
You can throw out all your numbers you want but they are not right. SOL did not guide 20-21% GM. If they have blended costs of $0.53 as you suggest and their ASP is going to be up a penny to $0.67 as guided by the company, then margins should be almost 21%. But they guided only margins slightly up to 15-17% from 14.7% in Q2.
I take that as a positive sign as of 2 years ago, there were around 2 anaylsts following solar. I remember a CSUN con call in which there was ZERO questions asked. Zero, Nada, Zilch Zippo, nobody cared to hear what they had to say and to get any clarifications or information on the market segments and environment.
Yes you can not read and like false math. They are starting to wordsmith so you can now look at how much is being shipped to projects.
The increase is on MW shipped for revenue that is appx 80MW. to 650-680MW. That is appx 80MW low end guidance increase from the prior Quarters 570.8MW shipped for revenues.
The shipments of 800-850MW is above revenue shipments of 650MW to 680MW and is going to internal projects they own. That is about 120-170MW of shipments that is not for revenue today but will return cash over 20 years.
For the third quarter of 2014, the Company estimates total solar module shipments to be in the range of 800 MW to 850 MW, which includes 650MW to 680MW module shipments to third parties and 150 MW to 170 MW for its own downstream projects.
Declining margins by 10%
Lost capacity of ~75MW/Q
Q4 shipments flat to Q3 guidance based on midrange year end shipment guidance
Project ramps very slow in first half of year.
Debt increasing significantly due to projects
Account receivables days outstanding increasing.
Please name your positives
Mine is lower production costs $0.33-$0.34
A 2% hit on margins with an increase of 80MW of modules should add around $1M to net over Q2. Add slight increase in gross from projects and they might be sniffing around $0.04 increase on fully diluted net.
Multiple reasons lower ASP in some regions including China and Tarif impacts. US could cause a 3% hit on margins alone depending on volumes and ASP. This is going to more than offset gains in shipping volumes and slight cost reductions.
This will be far worse on some others
Ok lets start with the your cost premiss. of internal at $0.49 and external at $59. Fact checking what they stated from seeking alpha
Hey, Patrick, regarding the cost, internal and OEM cost, in Q1 we have announced that our internal processing cost was $0.53 and OEM cost was $0.63. We have reduced the cost on both sides. Internally, we have reduced cost by more than a penny, so it's between $0.51 and $0.52, and OEM we have reduced it to $0.60. And we intend to reduce the cost even more in this area in Q3.
Those numbers should be beaten as Q2 should be over $400M Q3 around $450 and Q4 approaching $500M. They should be pulling down some $46M per Q before Forex and other adjustments.
It is not cost competative due to the fact they have only 250MW of their own cells or 65MW per Q. That means if they ship 600MW 535MW are OEM. That would be a blended cost of $0.58.
JKS costs of $0.47, their outsourcing is appx $0.57. They ship 10% of outside sourced. That places their blended costs at $0.48 a whole 10 cents better.
Now I quoted JKS of the past quarter vs SOL of the current quarter.
So now you can see SOL is at a $0.10 price disadvantage based on costs, There is a reason SOL is not chasing markets like India and China. They can not afford to enter those markets due to ASP pricing pressures.
What the numbers may be pointing out is that the first half of the year, they were shipping roughly 50MW per Q to internal owned projects and the rest to EPC work(recognized as module sales) and customer module sales.
The numbers ramping might imply greater EPC work and project status that now that summer is in full swing is in later stages of build out and taking modules for them. This sets a target of what may appear to be 100-200MW over the next 2 quaters each that are being finished up and will go into a commissioning phase for either Q4 sales or 1H 2015 sales.
This rate of installation would be reasonable for a 2015 target of 60% of the current backlog 1.3GW being sold in 2015.