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- Yesterday
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I will summarize tomorrow. It is a bad beating for the week. Not too bad for the year. Very well done!
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Yes, that's what I'm looking for, too. The current pandemic scare is just the trigger to bring us back to levels that more realistically reflect the macroeconomic factors you mention. And from what I've heard on the news so far, the bad news about lack of US preparation for an outbreak is just starting. We have virtually no testing kits, and not even something as simple as masks. Couple that with an administration which is purely incapable of telling the truth about the most mundane things, and God help us if we actually have a serious outbreak in an urban center somewhere. Batten down the hatches, folks, it's gonna be a wild ride....
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Holy cow! TSLA was almost $1000 two weeks ago. Now only $630. Almost 40% drop.
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The markets have taken a big hit this past week. They are down near 11%. The question is how far can they go? The markets were at 29,000 and the PE had been pushed up to over 20% from the hstoric norms of around 16. This while corporate profits had a 1 time spike as did the GDP from the massive tax cuts and the increased deficit spending. Those tax cuts added $500B into the U.S. economy with much parked into the Markets. On top of that you have the markets driven in part by a 400 fold increase in leverage in the markets since the crash in 08. One would think if GDP slows, which it has, and if you factor out the $500B in deficit spending increase, ther real GDP is under 1%. The profits are not going to climb and the PE ratio that was forward looking at 20% needs to pull back. In a heavy drop, you can see the margin calls rolling in from all the leveraged buying that has happened. To me this would indicate you could be looking at a 20% + market pull back from the highs. That would peg the market drops down to around 22,500 to 23,500. Those numbers put you in the range of the late Dec 2018 early Jan 2019 range. Those numbers would also put the average market growth in around 7% under Trump which is more in line recent historical averages. Just my 2 cents.
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That is going to be the next hot Xmas item, the Corona Doll complete with accessorised N95 masks
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You can not look strictly at margins. You need to look at regionality and cost to manufacture and compare to Opex+ Interest + local SGNA. For example, Jinko costs for GA + Research + Interest per watt is roughly $0.015. Shipping inside China is negligable. Therefore anything manufacturing costs under $0.205-$0.017= $0.188 is net profitable and more than cash flow positive. By my estimates, I see them manufacturing at $0.178-$0.182 for Mono Perc. We are now in the days of net per watt being a 1/2 cent which is why Mass of scale manufacturing like Jinko has been shooting for is required.
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I just noticed a newsclip on the PVInsights homepage talking about Junko winning a mono-PERC module bid in China for 20.5 cents/W. This got me worried because it's slightly below Firstes production cost. Here's the excerp: "...Jinko solar bids 40MW module orders with the lowest price at 0.205/Wp, delivered by Mid-March On February 11, 2020, China Bank Development Energy (CDB) released the result of the auction of two 20MW high-efficiency mono PERC modules with 400Wp+ for the 40MW solar project located in Yongning Ningxia, and..." http://pvinsights.com/ Here's corroborating info on guangfu. The winning price is 1.625 yuan/W which indeed is 20.5 cts/W ex VAT: http://guangfu.bjx.com.cn/news/20200219/1044752.shtml http://guangfu.bjx.com.cn/news/20200225/1047469.shtml Does anybody want to speculate how high the gross margin associated with that bid could be? Now elsewhere we got a hint that Junko's exports could be weak in Q1. If you add to this this info that inside China they are selling for extremely low prices, would it be reasonable to conclude that margins may possibly take a hit in Q1 and Q2?
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Tongwei's Leshan Phase II polysilicon project signing ceremony. 35kt, construction start Mar 2020, commissioning Sep 2021. Look how cute they all look in their corona masks! http://guangfu.bjx.com.cn/news/20200228/1048924.shtml
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I am curious how your investment portfolio is holding up. This is the first big drop since last summer when you set your strategy. You try to double or triple the market from the sounds of it using leverage, I am just curious what your rates of returns are like like since the market is down 11%? Are you down 20-30% in the week/year? My self, I got lucky last week at peaks, I sold out some short term trading stocks and flipped into my short the market hedging for a pulback. I built position in Wed Thursday and Friday. I was fully protected come Monday and made some good gains in Mondays 1,000 point decline. I backed out after Mondays big drop and have re-entered since a couple of times. Right now my hedging should basically break even whichever way the market swings. This week I am down 1.7% but am up for the year 6.2%. That compares favorably to the markets being down 11% for the week and down 8% for the year.
- Last week
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Of course DQ's earnings will take a hit, as will the earnings of EVERY SINGLE OTHER INDUSTRY based in those areas. That's not a surprise. What IS a surprise is FSLR's recent revelations about the results of their operations. If I were you, I'd worry less about companies I'm not invested in, and more about the single one I am. Just sayin'....
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Corona disrupting polysilicon production in Xinjiang. Just sayn'. http://guangfu.bjx.com.cn/news/20200226/1048014.shtml "...second, polysilicon enterprises in Xinjiang are restricted by insufficient supply of raw and auxiliary materials and poor logistics. , The operating rate further reduced..." "...third, the supply of raw and auxiliary materials in short supply, prices rose sharply, and the cost of polysilicon production increased accordingly..." Here's corroboration that the price of metallurgical silicon is spiking: http://www.sunsirs.com/uk/prodetail-238.html Could someone please connect the dots and tell us how all this will affect Daqo's Q1 and Q2 earnings please??
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suffer
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So will CN earnings in Q1 and Q2 suffer or are they immune?
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I believe the drop in Q1 is due to lower manufacturing output and the use of modules in China. The Corona virus is having an impact which will probably last into Q2. The Corona virus is probably worse than what is portrayed. The actions taken by the CN government suggests it is. They shut down cities, they are monitoring people for sickness, they are doing random inspections of people inlcuding transport cariers and truckers. i do not think you can trust their numbers or the U.S. numbers. I mean the Princess Cruse ship has a 20% infection rate of passengers. The death rate was suggested at 2%, if you look at global deaths vs reported cases(if accurate) then you have a roughly 5% death rate. That is 2 to 3 times what they were suggesting a month ago. Even in the U.S. the president says whe have like 10 people infected. Then the reports are we have 57. As far as impacts, this is going to hurt economic numbers. The Wuhan area is heavy industry with a lot of auto suppliers. The shutdown of Wuhan and other areas reducing manufacturing to 50%, is going to hurt the manufacturing around the globe. This is something that is going to last through Q3. I don't think this is over just yer, it is going to linger.
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We have quite the volatility spike in markets now. It is a good test for all active managers out there. Will their active return hold their ground better than their benchmarks.
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January CN module exports down 35% yoy. Jinko down 47% yoy. February looking horrible because of corona. Just sayn'. http://m.solarzoom.com/index.php/article/136805
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OK. They've missed consensus earnings expectations at least 5 quarters in a row now (using Yahoo Finance numbers). And given what they just reported, I'm not sanguine about quarter #6. There are much better chances to make money elsewhere in the solar sector right now. How much longer do you want to sit on the sidelines, watching the money train go by?
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Think track record. Since 2006 they have delivered an average yearly cost reduction of around 13%. I can understand that a year-end exit cost of 21-22 cts/W for S6 with a future cost reduction rate in line with the historical average must be painful for you. Hard to argue an imminent collapse of the company with that. And it gets worse when you think of the 12GW backlog sold for an ASP of 34 cts. I'm not going to calculate the margin out of mercy.
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Think marketing and presentation and the fact that Executives push the most favorable light on the company. They told you 4 years ago the cost saving was going to be 40% and that would be far lower than anybodies costs. They used that number , they gave you a number. They are missing that number a bit so far. From a PR expectation if you were going to cut another 10 cents or so in the next 1 or 2 years, you would be screaming that. That is what would be a home run PR. The executives push the most favorable futures of the company all the time.This time around they are not stating any number. Why is that? It is not because they are giving you criptic hints. That slide is a futures slide, indicating we have a target module wattage, and when we get there we see these certain costs dropping by x amount. You can hang you hat on 50%, but don't be disappointed when it comes in much lower than 50% like 15% or so from their targets they are already behind on.
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One example to show you how efficiency increase and BOM cost reduction act as independent drivers. Let's say FSRL spends $20 per module on glass. For a 400W module that's $0.05/W. Imagine that they manage to reduce the glass cost per module to $14 per module (supplier switching, co-location, insourcing, volume purchasing), i.e. by 30%. Parallel to that they drive module wattage up to 500W, which is an independent cpw reduction of 20%. The new glass cost per watt is $0.05/W*0.7*0.8=$0.028/W, i.e. 44% below original. I'm sure that's how the slide is meant. Your suggestion that they built a double counting into that slide because the efficiency impact is baked into the other levers implies they are either dumb beyond belief or purposely misleading investors, which I think is highly unlikely. Also keep in mind they are guiding around 10% in S6 cpw reduction for 2020 alone, which is the magnitude in cost savings you came up for the three year period.
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To quote a line from my favorite movie Joe Dirt, "Your got it all wrong". I believe you are making the classic mistake by suggesting that the cost savings from efficiency gains is additional to the overall cost savings. The fact is the cost savings is inclusive of the gains being suggested. So lets look at what each part of those gains are individually. Yield increase - 3% yield increase in 0.03*.24 = $0.007 cost savings. if you have 95 modules built out of 100 with 5 scrapped and your average cost is $0.24, then you production cost to build 100 modules is 95*.24=$22.80. Your yield improves to 98, so your cost is now $22.80/98 = $0.23265. $0.24-$0.23265 = $0.006735 = $0.007. BOM:(balance of materials) The cost savings of BOM depends on what you suggest the BOM . They said it was predominately glass and metals. Thus it is suggestive of the what would be the equivalent of the module processing costs of cSi. The module costs in most SI is sitting $0.08 these days or less. That includes labor and other costs. You are looking more like $0.06 for the glass and metals. 0.3 *$0.06 < $0.02. At best you looking at $0.024. if you use 8 cent BOM in the module process. Shipping: 0.15*.02 = $0.0033 So you are looking at $0.007+$0.02+$0.0033= $0.02103 Remember a 14% efficiency in inclusive in their numbers not additive. It has no impact on Yield number it is almost half the cost savings embedded in the 30% BOM cost reductions It is virtually all the savings in shipping costs(as expected)
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To get better understanding of my portfolio's return contribution I'm breaking out the part that comes from foreign currency denomination. That part consists of risks without premia, but the risks are negatively correlated to the other risks and thus contributes to total risk reduction and it does not allocate any capital so it is sort of costless. Hedging the foreign currency exposure would therefore add both cost and risk which seems like a bad idea. The reason for this free lunch offering in terms of portfolio risk reduction is that the portfolio currency is a smaller currency which like stocks is considered high risk and therefore correlates with stocks in risk on / risk off scenarios. The foreign currencies denominations of the assets translates to positions long those larger and safer currencies against the smaller and riskier local currency and thus those positions tend to appreciate when stock prices depreciate. The benchmark has changed to have volatility parity rather than leverage parity with the portfolio. Allocation Return Contribution Attribution
- Earlier
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Well we know when it comes to First we tend to see things slightly different. (From Q4 ER) Module Rev = $661.4M Module adj. GP ex ramp & shutdown cost = $174.8M Module adj. GM = 26.4% Module Vol. sold based on ASP of $0.34 = 1945MW S4/S6 split = 500MW S4, 1445MW S6 CPW S4 = $0.30/W (based on 17%GM and $0.36/W backlog ASP @ dec 2018) see below* CPW S6 resulting from the above = $0.233/W Based on their indication of a 5% cost step down from Q3 to Q4 (Q4 2018 presentation) and given that Q4 S6 sales volume contains 800MW of modules produced in Q3 (Q3 con call) I assume a further 1.5 pennies cost reduction for a year end production cost exit rate of 21-22 cents. Now regarding the cost reduction potential slide it goes without saying this is rough and not to scale, which they made explicit in writing and saying (see footnote on that slide). Also my indication of 50% is meant rough. The point is that FSLR is headed for a significant cost reduction over the next years. This is in stark contrast to your repeating doomsday scenarios that imply steep cost reductions for the CNs and mostly flat costs for FSLR over the coming years. I think you your calcs don't capture the compounding nature of the cost levers. If efficiency gains save 14%, BOM reduction 30%, and yield increase 3%, then the compound effect is 0.86*0.7*0.97=0.58 or 42% cost savings. Again, this is rough so no point in dissecting to the third decimal. Based on a 21.5 cents S6 2019 exit rate the above would bring them down to 12.5 cents exiting 2022. Combining that with a 12GW backlog at an ASP of 34 cents I see very good prospects for the company going forward both in terms of competitiveness and profitability. Who cares if they hit 14 cents and not 12.5, that doesn't change the picture. *Mark Widmar, 2019 guidance call, Dec. 11 2018: "...The other thing that we said is that we’re still selling through Series 4 and we are happy with the margin realization on Series 4. But again, we pointed to that to be in kind of the mid-teen – mid-to-upper teen, so that’s going to also say that, that number is below the 20% and that’s 2 gigawatts of our volume..."
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I do not see S6 at $0.21-$0.22 as of right now, I see it more at $0.24 with the S4 at $0.27 As far as the cost reductions go, that slide on Cost reductions is for their high production oversees manufacturing and is willfully highly misleading from a graphical perspective. You can not trust the block size ratios they are not proportionate for cost savings. If you read the slide that has zero numbers associated and compare the proportion of savings to known costs, the blocks are not representative of proportionate costs savings per step,. Thus the appearance of 50% more in cost savings looking at the block at the start and at the end are not accurate for ratios. It is a clear willful misrepresentation. You can validate this by looking at numbers. For example the block for savings on shipping which will save 15% is the same as the glass material that will save 25%. The glass and metals are far more expensive than the $0.025 shipping and warranty costs and therefore the block size can not be the same. That to me indicates the blue line is a target proportionate to the target costs of the initial 40% does not have an additional 50% cost reductions(aka 20% further for an aggregte 60% reduction. The first green block for example is for efficiency increase. That suggests an increase in efficiency gain of 13.6%. That block however drives much of the gains in the future blocks and is not additive in cost reductions but is included in where they suggests costs are reduced. So the $0.03 cost savings that that efficiency gains might be suggesting is actually included as how they are reducing other costs. The 30-35% better throughput just reduced depreciation and some plant overhead. Labor is still going to be similar. Nearly half that efficiency throughput is from gains of Wattage from the new sputtering processes. So you are looking at a penny to a penny and a half in savings from the throughput. The 3% yield increase, is basically $0.00075 of a cost savings. That is not even 1/10th of a cent. The 25% glass and metals savings is basically around $0.015-$0.02 guesstimate. The 15% shipping, well that is mostly due to more efficient modules. That on a generous 3 cent shipping and insurance is 1/2 a cent. Totals therefore 1.5+0.1+1.5+0.5=$0.036 in added savings by my estimates. That is not a 50% more decrease off of the already suggested 13-14 cents. That is more like a 25% decrease of the $0.13-$0.14 current decrease.. That places their target costs around $0.18 come 2021 for only the overseas production. The high cost US capacity adds appx $0.01 to that cost. Thus the target cost for 2021 s more likely $0.19 or $0.02 below the target $0.21 costs of their high capacity overseas. That would be their suggested blended costs for 2022.
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How about the fact that THERE WEREN'T ANY?? OK, the loss is apparently due to a legal issue. But even without it, they reported a yearly EPS of $1.48. That's a far cry from the 4-5-6 or so I seem to remember from previous prognostications for FSLR from certain posters. And that huge legal cost should be a GIANT red flag to any investor. It's a sign the company is doing something SERIOUSLY wrong. What EXACTLY is this liability? How long will it continue? How many more quarters will show losses? Why didn't management see this coming? All I'm saying is that right now, there is a LOT of money to be made in the solar sector. I'm making some of it. So are other posters here. If you're not (and if you're a simple buy-and-hold investor in FSLR, unfortunately, you're not), you might want to investigate why. If FSLR's operational results are so great, why are the earnings so small? If it's because management can't get out of its own way, why do you think that will change in the future? Given the overall surge in the entire solar sector, the bottom-line question each and every solar investor should be asking themselves is this: If you can't make money in this market, when do you think you will? All the best to you, Solarpete
