Increased shipments beat by about 100MW.
Capacity now maxed +
$1M profit from operations
~$20M added profits from Warrants change in FMV and a Tax credit
margins mid 15%
module processing $0.43
cell processing $0.11 blended
Si cost $0.10
Expected to drop processing costs below $0.40 by year end
Poly is around $22 and expected stable from large suppliers small suppliers raising prices
Slight drop in ASP for Japan in Q1 by a penny or so to $0.69
ASP Japan flat rest of year
module ASP $0.65
cell ASP $0.37
2014 - MW shipment guidance - 2GW are target modules and the rest are target cells
Projects - 200MW complete end of Q2 Q3, expect sales revenues in Q3 Q4
Project Margin 10-15% due to lower FIT for new projects older projects higher range 15%
retainage $17M 40-50% to be recognized in 1 year
/// Absolutely no one predicted a profit until end of 2014 and now they will be easily profitable in Q1///
Really and with out the $12.5M in gains from derivitives and without the $9M in losses they claim would have made them profitable, where were they? A $10M loss. That is what you can expect from Q1 and more when they report derivative losses due to share appreciation instead of the depreciation. You might be looking at a $16M loss with adjustments.
You are correct though they showed 16%+ GM wich was great improvements. That is similar to Trina and slightly above CSIQ module business.
The issue however is they reported the highest ASP at $0.68. That is 2 cents more than Trina and $0.05 more than CSIQ. They did this by doing over 40% of their shipments to Japan. If they want to grow with peers, they need to address the Chinese markets that have an ASP in the low $0.60's. Japans ASP is in decline and if they need more shipments then they will hit lower ASP regions like China. A 10% increase to China will drop their ASP by almost a penny. Add to that the penny plus decline in ASP in Japan and you have an ASP in the $0.66-$0.67 range. With their costs at $0.59 including write off or $0.565 if you take out the adjustments, there is little room for significant decreases in production to offset shipments to cheeper markets or the decline in Japan. In fact a penny and a half decrease would lead to a Gross margins decline to the mid to upper 15% for their modules. Add to this an increase int he price of silicon that should add 1.5 to 2 cents in costs and a rise in wafer prices by similar costs, with process improvements they could see low 15% range for Q1.
Why did you not hear this in the con call? because no analysts asked any questions like they did for JKS Trina and CSIQ.
but that is my near term 2 cents on HSOL. Disclosure, I do not own HSOL.
Margins costs and ASP for modules Trina CSIQ JKS HSOL
per con calls transcripts from Seeking Alpha
Module margins = 13.2%
Costs = $0.59
Cost less provisions = $0.565
“COGS per watt representing over 7% a quarter-to-quarter to $0.59”
“ASPs were stable at $0.68 per watt”
“giving us a gross margin of 14.1% as compared to 5.1% for the previous quarter. “
“Gross margin would have been 16.1% without the impact of the aforementioned non-cash charges. “
Module GM = 9/68= 13.2%
Module GM no provisions = 16.7%
Module margins = 16.8%
Costs = $0.549
“ASP increased to $0.66”
“Gross margin excluding the impact of projects developed was 16.8%”
“Our brand gross margin was 16.8%”
Module GM 16.8 = Cost of $0.549
Cost= 0.66-(0.66*.168)= $0.549
module margins = 15%
module Costs = $0.53.5
“If we surely the purely internal processes it’s closer to $0.50”
“if we used wafer and produced cell, a module cell, then the manufacturing cost – few manufacturing cost being and Q4 is almost $0.48. “
“But if we use kind of – the Taiwanese solar cell and produce modules for Japan, for example, then the cost will be roughly $0.06 higher for that portion.”
“blend it altogether, it goes more than $0.53 or $0.54”
“ We said it’s going to between 13% to 15% it was at the higher end of that range in Q4”
Module ASP = $0.535/0.85 = $0.629
module margins(in house) = 24.3%
module Costs(inhouse)= $0.48
“I think $0.39 and plus the silicon cost $0.09 is around the $0.48.”
“In-house gross margin relating to the in-house silicon wafer, solar cell, and solar module production was 24.3% in the fourth quarter”
Yes in December they were at $25, In January they were at $36 in February they were at $26 then $37 after ER now $30. In September they were at $16. Depending on when you bought and or sold, your fortunes have been on a roller coaster but with a clear upside trend even after the punishment since CSIQ and Trina announced it is still up almost 100% in the past 6 months. Fundamentally, this company looks promising even without project revenues. Q1 is almost over, Q2 is just around the corner with better weather ahead. By Q2 ER 2015 should start to have decent clarity and most of the grey in the air regarding tariffs will be past.
If you look at their core business of modules, this company is the only operationally profitable company in which gross profits from modules exceeds the interest and opex of the company. All other companies can not make this claim. While other companies will generate as much cash as Jinko in 2014, the EPS and profitability will be far less. Only CSIQ can come close with project sales of their business model included. Those projects sales are lumpy and inconsistent as CSIQ missed revenue and project projections from 2013 and apparently lowered project expectations for 2014.
Flat shipments relative to Q4 is not strong but I will give you it is stronger than shipments from peers partly due to under utilizations. Wether they post a profit in Q1 is undetermined. They have around $44M on opex and interest. With Q4 shipments and ASP you have $213M in revenues. That implies they need 20.5% GM for an operational profit. If you factor in 1 time adjustments, they may be able to make a profit or claim as they did in Q4 These are executives paid to spin the best light possible and not accentuate the non positives.
It is noted by me that there were $12.5M in gains in Q4 from forex, and derivative gains etc. Without them, they lost nearly $17M and not the $4-$5M . That is $13M without the write off. Those $12.5M gains should turn to losses in Q1 with the share price gains of Q1. Even the big 400MW + in later quarters will only add around $5-$7M in gross profit. That will not be enough to make them profitable without paperwork adjustments.
just looking at the numbers, they have near $50M in Opex and interest. Operationally speaking they need near 20% GM to break even. The rest the adjustments the forex paper book accounting and not reliable. The stick goes up, their adjustments hitting the books go up up. Basically profits this Q was from a major gain on the capped calls. Else the loss is far worse. This quarter Q1 the stock is up and they will have a nice loss on the capped calls taking the near $15M shorrtgall on gross profit to opex and interest from Q4 and driving it even more negative. That $15M shortfall might only be a $10M shortfall in Q1. With adjustments, they could be looking at a $15-$20M loss in Q1 even with the margin improvements.
CSIQ was decent ER and guidance. Not blow out. Trina was decent not blow out. JKS guidance was right were they needed to be. If you look at guidance except for some minor margin improvements through the year, Q4 was what one can expect for most of these companies this year from module sales. A llittle lower to start a little higher to end. But that is what they seem to have guided and what their capacities will allow. JKS on the other hand, guided where they market size suggested but capacity expansion by year end suggested could indicate upside.
///. I think JKS will make over $10 per share in 2014 and over $15 per share in 2015///
really??? show your math.
I see $5-$6 in 2014 EPS 2400*.14=$336M GP
I see $45M in PV project GP
Total GP $381M
Opex + interest $200M
$181M before tax and adjustments
32M shares outstanding
considering they can't drink their water and the mountains are bulldozed and made into slurry pits, I am surprised it is that strong
were not you the guy who said he was maxing out his credit cards and taking a second mortgage to buy LDK back in the summer of 2011? Pump Pump Pump er Doh is back. PhreeTrash PhreeRash etc.
2015 looks very good. I am looking for and increase of 700M-800MW modules based on anticipated market growth of 5-6MW over 2014. Their year end capcaity at 3-3.5GW. That is good for is good for 3.6-4.2GW+. With 500- 700MW of proejcts that leaves 2.9-3.5GW of modules midrange 3.25GW.
I also look at the 2015 target to be 52GW AC rated projects. This is a target 65GW of DC rated modules. This is an increase of 7GW DC estimates of 58GW DC(47GWAC) rated 2014 level of shipments. This means they grow at a 15% market share or well above the ~5% current market share.
I posted some number on JKS board but in general $8-10 a share if they keep the project business. If there module only $6 a share in EPS off the top of my head
Tariffs, one can speculate but until they are set in the US, the impact is unkown above what I described above. One might guess an additional 5 cents or $15M and another half cent impact on costs for all 2500MW. In addition there is increased calls for tariffs in Japan and Australia on both Chinese and Taiwanese that may impact the cost of business.
The FIT reductions and incentives dropping in Japan Europe and California should lower the ASP in these regions along with increased competition. This should not be unexpected as they are telegraphed and have shown in the past through Germany that a decrease in FIT can lead to a rush of orders and higher shipments.
Regional Shipments there is reason I believe ASP will stagnate at $0.64 or drop a penny or 2 as regional shipments shift. The shipments move from higher priced Europe to lower priced US and Japan with Japan ASP dropping several cents this year from the $0.70 in 2013. They indicated China ASP increases are likely to stop as the ASP becomes stable in China. That was a driving force with the lower processing that lead to the increase in margins. That and and the 20% reliance on Europe in Q4 maintained a higher ASP.
These lead e to believe margins for JKS will stagnate as there are areas of cost increases that can impact current Q4 costs by more than the 1.5 cents of Poly and could add 2.5-4 cents in costs. A belief in stagnant ASP to a slight decrease would just indicate margins maintained around Q4 levels for most of the year. This may move up or down a penny or 2 . A penny shift is a 1.5% increase or decrease on Gross margins at $0.64 ASP. I find it unlikey not improbable for 30% margins for modules on a $0.64 at the end of the year 2014.
I have conservative view with margins for modules at 22.5% and overall blending at 23.5%. I am being conservative on these ranges. Based on these ranges and my target Opex and interest, I have upper $5 range before forex and other adjustments. I do use a lower ASP at year end than $0.64. Average guidance is 20% increase from Q4. So one should not expect much more than 20% over Q4 net profits. With the added project revenues you could expect $30-%50M +/- added net. This gets offset by increased share counts.
It is uncertain about exact margins as there are several factor at play that creates upside and downside risks. Costs, outsourced costs, tariffs FIT reduction in key markets, regional shift in sales.
First is cost. At $0.39 in Q4 and a drop being conservative at 5% you have a $0.37 processing. The better spectrum has a 10% cost savings and a $0.35 cost. I use the conservative approach for the year. I view the 10% as a year end cost target with reasonable probability to be met. They indicated Q1 a rise in Poly of 1.5 cents from the $0.09 on $18/kg poly . That would indicate 5 grams at $21/kg. There is risk that this could increase by another $2/kg or $0.01 basically keeping costs flat to Q4. Looking at that I model a conservative cost of $0.48 for internal costs.
Outsourced costs to the US generally runs 6 cents. If Tariffs are in place on Taiwanese cells, then that cost may increase even further. With increased targets in the US to 15% 300MW shipments, the blended overall cost impact will increase from the Q4 level of 7% of shipments. This should offset some of that 2-4 cent processing savings. This cost could be $12-$15M additional or half a cent on total shipments.
As CDB debt, they want their money. You can't leave it behind for the US shareholders to own. Basically you have to hand over the assets to the CDB, then they can spin off the company for the debt owed + . In the meantime the US delists and removes itself from existance.