Solarfun (SOLF) warns

Is the fun over for solar stocks? Well…
Good things and bad things. Growth is coming back, which is good (obviously). However, prices are tumbling, but this seems to affect SOLF more than most Chinese solar panel makers.

UPDATE 3-Solarfun Power warns of continued ASP fall, shares drop
Fri Mar 5, 2010 2:05pm EST

* Sees Q1 ASP down 10 pct vs Q4; Q4 ASP fall 4 pct vs Q3

* Q4 profit 10.6 mln yuan vs loss of 418.8 mln yuan yr-ago

* Sees Q1 module shipments 130 MW to 140 MW

* Sees 2010 module shipments about 600 MW

* Shares fall as much as 11 pct (Adds analyst comments; updates share movement)

BANGALORE, March 5 (Reuters) – Chinese photovoltaic (PV) cell maker Solarfun Power Holdings Co Ltd (SOLF.O) forecast a sequential rise in first-quarter module shipments, but warned that the fall in average selling prices (ASP) would more than double, sending its shares down as much as 11 percent.

The Shanghai-based company, which swung to a fourth-quarter profit, said it expects first-quarter ASPs to fall about 10 percent. ASPs fell about 4 percent to $1.95 per watt in the fourth quarter as the market prices of PV products dropped.

Shares of the company fell as much as 11 percent to $6.72 on Nasdaq, making them one of the top percentage losers. They were down about 9 percent at $6.88 in late afternoon trade.

“Relative to very high investor expectations and several other Chinese peers, fourth-quarter results were somewhat disappointing,” Barclays Capital analyst Vishal Shah said in a note.

ASPs declined more rapidly compared to several other Chinese peers,” he said.

And while Solarfun signalled an uptick in demand, guiding towards sequentially better shipments, Barclays’ Shah termed the company’s shipment view “aggressive,” given the company’s large exposure to Germany.

The German government wants to cut state-mandated incentives for rooftop solar power by 16 percent from July 1.

Fears that demand in Germany, the world’s largest solar market, will fall sharply have also prompted fears across the industry that prices for modules will decline dramatically.

“Given the larger than average exposure to German market, we see greater risk to Solarfun’s second-half 2010 shipment expectations compared to most other Chinese peers,” Shah said.

Solarfun expects to ship between 130 Megawatt (MW) to 140 MW in the first quarter, compared with 110.8 MW in the fourth quarter.

A glut of solar cells and modules pressured prices by about 40 percent last year, but a recent rebound in demand ahead of expected subsidy cuts in Germany has boosted sales.

Chinese players in particular have seized on rising demand, turning their low-cost structures into sales, and several plan to boost production capacity in 2010.

For the fourth quarter, Solarfun posted net income attributable to common shareholder of 10.6 million yuan ($1.55 million), compared with a loss of 418.8 million yuan last year.

Shah said the company’s fourth-quarter profit of 21 cents a share was below consensus estimates of 24 cents a share and his estimate of 29 cents a share.

Quarterly net revenue rose 12 percent to 1.25 billion yuan. [ID:nWNAB5882]

The analyst said Solarfun’s revenue growth lagged other Chinese companies, including Suntech Power Holdings Co Ltd (STP.N), Trina Solar Ltd (TSL.N), and Canadian Solar Inc (CSIQ.O). ($1=6.826 Yuan) (Reporting by Arundhati Ramanathan in Bangalore; Editing by Jarshad Kakkrakandy, Savio D’Souza and Maju Samuel)