I did not buy any solars in 2012. I started buying back in and selling out frequently in early 2013 on gains of 25-75%. I had been buying and hold for days to weeks to months typically. There are 2 stocks I felt solid about for profits a while back CSIQ and JKS. SOL was also a bright spot until they noted ASP of $0.60 or way above where they lead you to believe based on comments.
The 3 primary stocks I have traded in are CSIQ, TSL and JKS. I have bought Jaso once or twice months back and have bought in and out of Yingli a few times for a momentum trade and not fundamental earnings. I currently own JKS CSIQ TSL SOL that I bought into again on the recent pullbacks. My CSIQ and JKS are my largest holdings and will remain as such with Trina as my 3rd largest.
As noted in a posts recently, the suggestion to hold through next year for JKS and CSIQ and you should be rewarded even from these levels. TSL as I note is pushing the envelope of price to what I perceive as 2014 earnings potentials but I do see potential upside and I do see growth into 2015 that could lead to justified higher prices in mid 2014. I am not really buying for 2014 rather for 2015 potentials where earnings could be double 2014 levels.
I have been surprised by the strength of TSL and Yingli since April since neither of the 2 showed strong signs of profits this year and do not show the promiss of as strong earnings per share as a JKS or CSIQ.
If you look at revenue generated vs Opex and interest Trina was at ~18% Opex and interest as a % of revenue in Q2. Trina has other income from kits than just the ASP for selling a module. In Q2 the ASP was stated as $0.64 but the average revenue per watt shipped was $0.681.
Trina stated 13.7% GM on the average of 0.681. If they add $0.01 by flat costs and a penny higher ASP then the margin would increase to 14.7% a 2 cent increase drives that to 15.9% margins.
Depending on how you track costs for operational expenses you could use a static cost per watt shipped or a weighted cost per watt shipped.
If you use a static cost shipped then every watt shipped adds $0.101 per watt or roughly $12M as the same as Q2.
If you use a weighted regional ship cost in which sales cost including shipping and commissions increases with every watt shipped but General Admin is rather static as is RnD, with local to China in the 3 to 4 cent range and oversees at $0.07 to allow for higher shipping costs and commissions you get differing rates of margin requirements Heavy shipments in China say a 50/50 blend puts cost at around $0.05 blended for Opex.
Using the 2 methods costs and margins as a % of revenue ery
Static = $66M+$12M+$11M = $89M/77
Weighted or regional = $66+$6+$11 = $83M
There is also a re-occuring $2-$3M gain per Q from interest so the amount comes to $87 vs $81M in likely costs for Opex and interest using the 2 models.
At 770MW shipped with the ASP climb of 1.5 cents to account for the margin climb, you have 770*$0.691 = $532M
In a graded Opex model you have 83/532 = 15.6% GM required for profits
In a static Opex model you have 89/532= 16.7% Gm required for profits.
Trina also reported completion and connection for a 50MW project generating power in Q3. They may have some Tarriff feedback for the completion or other revenue recognition from this as well.
So you can see they are on the cusp of profitability depending on where costs come in.
As the eternal optimist I am known for in a Bull cycle :)
with 775MW shipped at $0.65 with cost of $0.55 they make $77.5M
add in some kits that add $38M and similar margins you have another ~$6M GP for ~$84M.
That to me is around ~$8M net profits before taxes Forex adjustments adn writeoffs. Which to me is inline with what I suggested. Just not quite the margins expected but with far more increased sales .
So I still look for them as profitable.
And now they have guided 2100MW of the 2.3-2.4GW for the year. It would not surprise me that they guid to 2.8 to 3GW for the year. That is actually far surpassing what I had expected for the years potential.
Slow and steady, there will be ups and downs. The bull cycle is likely to run into 2014 and towards 2015. In 2014 the Tier 1's are capacity constrained as are the Tier2 companies. That should allow amrgin increases above todays 14-20%. That also leaves the door open for a bunch of small idle plants to come back online and or some new heavy hitters like FoxCon and others to ramp significantly. This could lead to a potential of 1 more run of over capacity for 2016.You should expect the bull cycles to elongate with lesser and shorter bear cycles.
Odyd wants to make the site a self sustaining business for himself. There is nothing wrong with that. He has taken the time to make relationships with companies and people in the industry and thus has gained access to some of the major companies personel for interviews. That is very admirable.
The only fault I saw is that he let personal opinions and perceptions take precedence over analysis based on data and allowed certain people liberty to attack others personally instead of discussing the issues. The forum that you now have to pay for is basically repost of market news and opinions on market developments. In my opinion that is not money worthy as most are taking the already present information and speculating. The key data they touted as an advantage earlier this year, he is selling is from Solarzoom.
For now I presume they are all very happy over there being long on solars as most are and making money as most are.
I wish him well on his site. If it gets active enough and adds enough value then he can sell it and make more money like the Huuffington post did. The difference is the Huffington post blogs were open to the public and not for pay and there were lots of unpaid contributors who created the value in the Huffington post and did not get any of the gains from it and had to sue.
They key is Q4 and peaks into 2014. If GM is guided higher by a couple percentage and shipments are to remain flat toup, then that is excellent news if they guide ASP trend higher for 2014. If they guide module shipments flat to down for Q4 and margins flat, that is a bad thing.
You clearly have short term memory loss as to who is late to what party….
On Sept 12th I was telling Rock
“The ASP should increase in general around $0.02-$0.03 in Q2 and then if you add the increase for EU at $0.75, they could see an ASP of upwards of $0.67+. If you average in kits, then they start to push $0.72. They could make $0.13-$0.14 per watt shipped.
At $0.13 and 680MW they could Gross $88M which with cost controls could put them profitable. Add to that probable forex gains. I could see them profitable in Q3”
And on Oct 2nd
This Q I expect a small profit of around $8M before a nice Forex gain.
Below is not This Q but within the next couple. This Q I expect a small profit of around $8M before a nice Forex gain.
Avg ASP $0.67
Avg Cost $0.52
Kits 20% of shipments @ $0.20/watt GM 22%
And to those who read transcripts as I mentioned to Rock in the same Sept thread Trina indicated they were at 20% gross margins in August. Courtesy of Seeking
higuo Zhu - President, Module Business Unit
Yeah, to reach to the high double-digit and gross margin we can’t (inaudible) to achieve that right, and for example, ASP and we do see we have the (inaudible) gone up a little bit percent or higher, and if we have for example just to give you an example high 60s, all right. If we have middle 50s in cost, you have about 20% gross margins right there. So that is profitability, we had in August and you calculate it, all right.
It may be real tough for SOL but it is remotely possible from a pure manufacturing operations. They need to have everything align just right in that the wafer ASP rises a penny or 2 and module ASP run $0.66+. They then need to control Opex by driving it down $2M due to lower shipments. They do have some wiggle room with the RnD budget the have. I do think that the have a chance for a net profit when Forex is thrown in. In a perfect world I could see 12-13% margins in Q3.
Yaah most desired the second half of 2011. I believe that is what Hobo and others were stating after Q1 and finding out there was over saturation.
All things have pointed to Q3 as the pivot quarter for the most efficiently and lowest opex ran companies. This is starting to be recognized. Q4 should bring others around to potential profits but the old behemoths like LDK aint goin anywhere.
Question what did Trina Manamgent mean when they stated they expect margins to be in the low double digits? They did not use the words in the low teens adn by all other operational metrics, they appear to have guided well up from the 13.7% achieved in Q2.
They were at 13.7% GM in Q2 if you back out adjustments for mothballing capacity. They expect processing costs to drop in the mid to upper digits or 1-3 cents and they expect ASP to climb. That means there is 1-5 cents of increased profits or 3-10% margins improvements. If SI climbs slightly then likely around 4-5% improvements on margins.
I own shares in TSL. I expect their margins to be 17-19% in Q3 and a slight net profit of around $7M before forex. Q4 I expect 20-23% margins and net around $27M before forex. I expect that they should maintain 20%+ margins in 2014 and ship roughly 30% more than in 2013.
The earnings are going to be very nice. What should be recognized is that the boost is only based on around 40MW of project sales that includes incremental billables. Remember they have another 600MW plus in the next 5 quarters. That is on average 80MW more that what they just shipped. Granted not all are the 22-25% margins but 2x at 17% is even stronger than ccurrent
TSL missed guidance 6 of 7 quarters and failed to target China for growth or for entering into project development. That missed the ball on those 2 aspects of drivers for the business. TSL will have some of the best manufacturing costs but they require volume to lower Opex ratios to where JKS and CSIQ are for manufacturing. Couple that with twice the amount of stock on average of the other 2 you may have about the same gross profits but lower net and lower EPS.
I am by no means an expert on inverter costing but wholesale inverters are around $0.40 for the leading SMA inverters in the US. I have seen the ReneSola micro replus for as low as $0.50 retail. I believe costs to manufacture inverters for SMA are around $0.15 from what I had read in the past 6 months.
I presume SOL can manufacture for less and if the stated guidance is 20+% margins, then you would be looking at $0.18-$0.20/watt for inverter sales.
ReneSola had nearly $10 Million in other revenue outside of wafer and modules. My guess is this is inverters , kits and Lighting.
My speculation is they are around 10-20MW of inverters for around $2-4M per Q right now with impact on net profit minimal at $400-$800K.
My belief is they ramp this to 80-100MW per Q by the end of 2014 or as suggested 285MW aggregate in 2014. I do see many sites now offering their inverters as individual and as part of ReneSola Kits. One site offered 9KW kits for $17,000 or around $1.89/watt. That is retail on the web but that maps back roughly with distributor markups and wholesale/retail markups to appx pricing based on ASP and markups.
Rough numbers 2014
$107M other revenues(wiresaw/ledproducts/powergen)
Poly plant will not be spun off as it will be a beneficial asset next year with costs at $18 while market is $25.
I am just pointing out where there could be changes to guidance founded in their numbers. If you want to go by corporate stated guidance at time of ER that is fine. But remember of the past 3 ER releases, only 1 ER was accurate on guidance and that was when they gave a general margins will be positive statement after a quarter with a large inventory write off.
In the most recent quarterly ER for Q2 guidance they beat margins as stated in the Q1 con call by 50% or 2.5% higher than originally guided. That is why one should look inside the numbers to find upper and lower numbers. I believe the probability is a higher GM if they reach the $0.66 ASP for modules as guided especially since wafers have been trending higher as well. I do not expect them to be significantly higher and I do not consider 9.8% or 10.4% GM blowouts as they should still report operational losses.
Here comments and reality from the last couple Q's transcripts from seekinalpha
Margins of more than 7% were reported in Q2, yet in the Q1 con call they stated
“And gross margin is expected to be in the range of 3% to 5%”
Q1 margins were neg 2% yet in the Q4 con call they stated
and gross margin are expected to be positive.
Q4 margins were 3.3% and in the Q3 con call they stated
Gross margin is expected to be positive.