Opportunities in smallcaps header image 2

Solars are getting hot again

August 12th, 2008 · 1 Comment

The selloff in oil and gas has affected the solars as well, but growth remains very strong. LDK just announced absolutely blow-out results (and is up 20% in after-hours trading). And there is more good news.. 

First things first, those blow-out earnings. LDK really was firing on all cylinders:

  • Street estimates as a manufacturing capacity expansion allowed the company to sell more solar wafers, sending its shares up 18 percent in extended trade.
  • Excluding the change in fair value of prepaid forward contracts, the company earned 82 cents a share, according to Reuters Estimates. Wall Street analysts had been expecting earnings of about 40 cents a share.
  • LDK’s second-quarter revenue was $441.7 million, well above the company’s May forecast of $278 million to $288 million. Analysts were expecting $288 million, on average, according to Reuters Estimates.
  • LDK raised its full-year revenue outlook to between $1.65 billion and $1.75 billion. It had previously expected revenue of $1.08 billion to $1.18 billion for 2008.
  • The company’s 2008 gross margin forecast was unchanged at between 23 percent and 28 percent.

As tremendous as these results are, a factor might have been the rush in the Spanish market to profit from subsidies that will be capped next month:

  • ThinkPanmure analyst Peter Peng said much of the second-quarter demand for LDK’s solar wafers likely came from Spanish solar system installers who are scrambling to finish projects before a new cap on subsidies goes into effect. “There is a pull for the Spanish integrators to get projects in by September, but even beyond that most of these solar companies are seeing very, very strong demand for 2009,” Peng said.


  • “There is a pull for the Spanish integrators to get projects in by September, but even beyond that most of these solar companies are seeing very, very strong demand for 2009,” Peng said. “There is a possibility that Germany, Italy and potentially France and other smaller markets could offset the loss of market size in Spain.”
  • The Chinese solar power company also raised its revenue and wafer shipment forecasts for the year. Second-quarter net income rose to $149.5 million, or $1.29 per American Depositary Share, from $49.8 million, or 45 cents per ADS, a year ago.

What is even more significant for other solars is that they see poly cost improving in Q4

  • Chinese solar wafer maker LDK expects its average silicon costs to improve in the fourth quarter, Chief Financial Officer Jack Lai said on a conference call with analysts. Silicon costs are expected to remain high in the third quarter, Lai said.

The irony is that this is actually not so good for LDK, as they will start to produce their own polysilicon just when prices will start decreasing.

Other solars are profiting from this news. Perhaps that long predicted day of falling polysilicon is finally upon us (we wrote about it here and here). Trina Solar, the company we follow, was up 5% in after-hours trade on Monday. Tuesday could be an interesting day. Perhaps the long slid is turning.

One might argue, yea, but energy prices are way off. Yes, but they’re back till levels of early April. As little ago as March, $114 per barrel would have been considered way out.

Next Monday, TSL is reporting. We don’t think results will be as good as those of LDK, and the little rally that seems to have been started today might actually stall if these are not stellar. Investing is almost never simple. But the rest of the week should be good for solars (if there are no major hickups in the markets or energy prices)

Tags: Solar sector

1 response so far ↓