The tariff impacts take 3-5% off margins.
The increase in shipments to China takes 2-3% off margins
The ASP collapse in Japan takes 2-3%
The global ASP at $0.60 takes 2-3%
bottom line serious downward pressure on ASP is cutting margins a couple % below mid teens
And it takes projects to get to 15%.
not the brightest sun in the world
If you look at it in general, they should gross 12.6% margins after tariff impacts and increased China shipments on a blended ASP that is likely around $0.62. Add in 10% kits at 16% margins and then the project sales, you should have earnings estimates of ~$770M and gross margins in the 13.7% range. That should lead to a gross profit of ~ $106M and net in the $20-$25M range. Opex around $72M and interest in the $10M range.
disclosure my Q2 estimates were high by $0.04 fully diluted.
I think when all said and done and numbers are re-calibrated, they will realize Q3 will be an improvement. Myself I never thought they would earn even a buck this year.
Depending on how it is resolved, there is only upside to margins.
Not very good as they have revised down an average of 400MW all for shipment revenues. This was from basically 3.6GW. These guys are not going to make money this year unless they sell some significant power plants.
If you looke at Trina SOL and Yingli all missing Q2 Guidance and Trina guidin margins way down and Yingli and SOL revising year shipments significantly down, JKS at the margins they are getting (20%) and raising projects looks to be a major plus over the peers
They shipped over 3.2GW last year with minimal amounts to projects. This guidance revisions is now 3.7Mid range and 500MW for projects. That gives 3.2GW midrange or near flat shipments year over year for revenues
right 15-16% margins? on 3200MW gross profit is int he range of $325-$350M. Opex and interest are running at $500M+ anually.
They are roughly $0.49 internal costs. With outside wafers they are appx $0.50. ASP in the $0.62 blended gives gross of $0.10 or 16.1% GM. Shipments for Q3 in the range of 900MW for revenues generates roughly $90M gross. The tariff impact for the US should be around $5M for a total gross of around $85M or 15% GM. Opex should be similar to Q2 to slightly down with interest equal. This would suggest Q3 they would lose another $45-$50M.
Q4 is suggesting 1250MW which likely has 200MW+ for projects. That places shipments in the 1GW range for revenues. At a constant $0.10 that is $100M in gross profits less US tariff and your at around $95M gross. An increase of Opex by around $5M to $100M + interest and again they are losing around $40-$45M.
This is based on no projects being sold.
I believe JKS and CSIQ are better ran.
I do believe that Trina is now back in the black and will continue to slowly improve. I do believe that Trina may have better upside as a % appreciation than JKS. Not much has changed on my outlook for earnings for 2014 and 2015. At $18 a share a little while back they were overpriced for growth prospects in my opinion stated on this board. At $11 they were reasonable priced for some share appreciation based on future earnings. I still hold to the mid $1.5 +/- for 2015 biased downside . That would justify a price in the $15-$18 range in my opinion. Based on that for a long term hold the stock would be reasonable to buy in the $11-$12 range.
discolure: I added to my holdings the day of earnings in the very low $12 range
I have not owned Yingli for several years. Their cost structures and debt reminds me of LDK albeit they ship modules and have better utilization rates than LDK had. In general though they had needed\ 20% gross margins on 1.1-1.2GW to break even due to an Opex that would climb to $100M and debt at $40M. Their projects are basically non existent until 2015. They will be keeping many of them. That will add some add gross profit for next year.
By the way if you look at Property Plant and Equipment their nameplate capacity is at a cost of near 50% higher than most peers. That is a bad thing in my opinion and makes the costs higher by a penny or 2.
not certain where you come up with the $800M + but at 15% GM you are looking at $120M gross profit. Current Q2 Opex and interest is at ~$135M and by your own admission going to go up with the added shipments.
Not all those 1100MW are shipped for revenues. By their own admission 165MW of projects in Q3 and likely similar rates in Q4. So reality is around 950MW shipped for revenue
I do not look at Opex as a percent of shipments when looking at a companies operational efficiency. I prefer to look at their costs on a per watt shipment and compare to their peers.
for Q2 yinli averaged $0.112/watt for Opex and $0.042 for interest. That is $0.154 in costs per watt
Peers Trina is at $0.068 and $0.0085 for a total of $0.076 or half of YGE,. Then again this is total shipments and not just shipments for revenue.
JKS is at $0.073 and $0.13 $0.017 for interest and a total of $0.09/watt shipped for revenue.
For Q3 The numbers are better for Yingli as the costs are estimated(including project shipments) to drop to $0.133 down from $0.154.
Peers Trian however drops from $0.076 to $0.071.
JKS drops from $0.09 to $0.075(project included)
I like to present this way because you can roughly estimate cost increases and you will notice that even though Yingli reduces Opex and interest per watt by appx 13%, their Opex and interest increases by roughly $8M to ~ $144M
How much does Yingli really get for projects? They are building them for appx $1.10/watt and are getting a 15% gross return when sold. That is $0.17/watt. On 200 MW that is $34M. Now the question is are these 100% owned or partners? If partners presume half the profits go to others so they gross $17M.
The real money is in owning the projects long term. This takes capital that Yingli does not have and the rate of return is very minimal over the first few years.
That is your argument YGE's margins remain above 15% and TSL is shrinking?
The point is that an ASP of $0.62 and a marging of 15% is $0.093 cents. Yingli is a far cry from that for Opex + interest at $0.156 and if you forcast the shipments growth Yingli remains above that 0.093 for the next several quarters.
Trina is below the $0.093 level already by $0.025 cents and will be even lower below that in Q3.
If you run costs today and the next 2 quarters, Yingli needs to have 20% gross margins to break even.
If you want them to be profitable they need to make more than $0.25 to justify a $3 stock price. That means they need to pull down nearly $43M in Net profits or $50M in profits before taxes. Where do they get an added $60M in gross profits per Quarter to earn that $0.25? On 1100MW that os well over $0.05 per watt extra in gross profits per watt,
At 1300MW per Q, they get $18M per Q in added profits and then need to find another $0.032 per watt or 5% in added margins somewhere some how.
These are not easy milestones to overcome especially when they are partnering in the downstream projects and fofitting some profits to peers and then forfiting some profits to GCL.
Add to that the over $800M in accounts receivables(aka shipments to customers) and it is likely you are going to see some sizeable writeoffs again from Yingli as they had in the recent past years
I could care less about the input costs and who pays what. I am presuming a 51/49% partnership and how you split up the profits after all costs are incurred.
Like I said, not certain where you come off with over $800M in revenue by Q4. Please explain your logic?.
Then the question is how much margins are you expecting on PV system sales and how much revenue? $37M is a lot of interest to cancel out at the current 3.5% gross margins of the Systems buisiness reported in Q2.