SolarPVInvestor Forums

Quoted from "Lepv123"

is a possibility of SOL going BK? Are they going to be financially ok until they start making money or a strong recovery in the solar industry takes place? Thanks.

No I don't think there's a chance SOL will go BK. In Q4 of the 6 solar 11s that have reported so far I rank them in first place on profitability. On balance they are in 4th place. The combination of great profitability (relatively speaking) and decent balance and no maturity issues with long-term loans and bonds should make them one of the safest bets. Also from the perspective of the political risk exposure to their income they should be safe, almost benefit opportunity instead. They'll be able to keep most markets open to them and be able control poly cost. Their revenue might rise more than their costs due to the trade war. This is quite unique to SOL.

I'm attaching my breakdown of the state of Q4 for the 6 reported solar11s. One-time charges have been removed. SOL was the only one who had none - yet a health sign.

EBT shows profitability
EBTDA shows operative cash flow excluding working capital changes
ROE shows the so-called equity melt rate
Decay rate show the rate at which leverage is ballooning (due to the melting equity)

For SOL and for some other names the thing is that they have now arrived at the destination 55 cents production cost and blending this into COGS will take SOL COGS from 60 cents in Q4 to the 55 cents level (possibly lower) in Q2. In Q1 it might be close to 56 cents, but ASP will hit the low point in Q1, so full gross margin potiental is not reached until Q2.

So for SOL and some other strong names, we are looking at a scenario of COGS 55 cents and ASP 65 cents post Q1. That's 15% GM. For SOL wafers they will have 21 cents COGS and 25 ASP after Q1, which is also around 15% GM. So 15% GM is a conservative hope for some of the strong names who manage to keep their capacity fully utilized. The thing with SOL is that they'll be profitable at this GM and get 25m cash each quarter available to use for working capital (reduce payables), investment (capex) or finance changes (reduce debt). So for SOL and others the decay rate has already bottomed and for SOL I see it turn into a repair rate already in Q2.

The GM required for profitability can be estimated as Q4 GM - Q4 EBT. For SOL this is 3.3% - (-11.5%) = 14.8%. That's why their path to profitability is clear even if ASP hovers around mid to high 60 cents for a longer period. So even if we get a very prolonged period where SOL is just breaking even or doing small profits, they'll still benefit long-term from this. A prolonged period where they are in repair mode (due to good cash flow) and most of their competitors are still in decay mode will improve their future business outlook.

I'm almost ecstatic to see the current PPS opportunity after having seen these clear signs of stability and very visible path to profitablity in Q2 at very little blood loss for SOL in Q1 (no where near transfusion requirement).

Odyd, just curious...

Have you changed your opinion of SOL, or are you still feeling "wouldnt touch them"?

My opinion on SOL fundamentals is well known. I do not see today for someone like me, with the long-term approach, to shuffle my holdings to CSIQ from YGE, as an example. Not enough critical data and I see things in YGE, which are scary and some which are very unique.
Under same circumstances, those who hold SOL would not see a reason for either fear or unique character to change their stance.
They are all the same and profitability will separate them at one point.
For a new buyer, imho, CSIQ is probably very attractive, as it becomes most "westernized" solar model among Chinese. I am not qualified to give investment advice so it is difficult for me to give you more.

Agree csiq chart looks better better balance sheet smaller float larger institutional holdings and csiq is always been wall street's darling in the past

As also seen in the sheet csiq is close behind sol on profitability in Q4 (the EBT margin, on cash flow and EBITDA the diff is slightly larger). After those two the gap is quite big. In Q1 csiq will slip a bit due to low shipments, but any other quarter in 2013 where they have big project revenue recognition they should be able to completely dominate the profitability of that quarter.

I added GCL to the sheet (though not US listed, many US listed depend or compete with it). Income is based on average for Q3 and Q4, since they only report 2 times a year. You'll notice some interest, depreciation (amo) and admin burden there. EBITDA positive, but far from positive net margin.

Remaining Chinese US listed companies of strength to report is Jinko.

Suntech, LDK, CSUN and DQ are likely in ugly decay.

Updated GCL COGS. Q4 was ugly for them. Looks like they dropped wafer price from 25 cents in Q3 to 20 cents in Q4 and dopped poly price from $20 in Q3 to $14 in Q4. That allowed them to maintain same revenue level as in Q3, but gross margin on solar materials dropped from 0% in Q3 to -30% in Q4. Their other business units helped keeping total Q4 GM at around -11%. These are estimations, since they don't give that detailed quarterly breakdown. The slashing of price in Q4 is given and with assumption of flat performance for other business units between Q3 and Q4, the -11% GM for the group results.

No wonder it is easy for TSL and CSIQ to cut procurement cost now and YGE wants a piece of that too.

GCL is clearly in distress now. They were running their poly plant at 25% utilization rate in Q4.

GCL probably slashed prices to make sure their solar 11 customers de-integrate. They depend on that. Utilization is crucial for them.

Quoted from "mena"

any info when sol longterm loans are due?[/quote

Convertibles for SOL aren't due till 2018

SOL's convertible note is due 2018.

Adding DQ column.

I'm adding lines for historical performance context to the 12Q4 state. Since 2012 completes roughly a full cycle for the PV industry starting with recovery and boom in 2010 and ending with the bottom in 12Q4, the 2010 to 2012 performance development of shareholders' capital basically gives the total performance during the latest cycle. This cycle and the performance from inception to 2009 are broken out. For these companies business of significance are only 5-6 years old or 2 cycles old.

Note that some of the losses taken in latest cycle include charges for bad decision making sins committed in previous cycle.

GCL, TSL and DQ dominates historical performance regarding development of shareholders' capital. During latest cycle GCL was the undisputed king.

Adding ratios to the equity history. The ROE is assuming the paid-in capital has been available for 5 years on an average basis. This assumption might not be very accurate for all the companies, but should still give a decent picture for comparison.

The ROE 2010- assumes that the paid-in capital plus the earned capital up to and including 2009 was available during 2010-2012. Some might have had additional amounts paid-in (shares issued) during that time, but I expect that to be relatively small amounts and that the ROE 2010- should be more accurate than the ROE ratio. I don't think anyone paid dividends.

Adding Jinko. Third best Q4 profitability. Most leveraged. Average historical performance after 91m in different non-cash charges in Q4.

I bought some SOL today. Hope you don't leave me holding the bag. Now can someone tell me with three bullet points why I did not make a mistake?

chrisceeaustin
You probably did not make a mistake if you have enough patience to weather manipulation.My the only question how long it will continue. currently the WS got enough funds to play the whole market and any specific stocks in any direction. Funds supply is not an issue now, FED can print them with no stop.

Quoted from "chrisceeaustin"

I bought some SOL today. Hope you don't leave me holding the bag. Now can someone tell me with three bullet points why I did not make a mistake?

Input:

• Poly security: World class 10kT poly plant (best cost together with REC and GCL)
• Tariff security: Outsourcing cells to Taiwan. Again has poly plant in China. Overseas module & wafer tolling arranged
• Lowest opex: Need less GM to get NM

Output:

• Proprietary production process with high quality yield at industry leading cost levels
  
• Brand in demand => shipping 2.9 GW on 2.0 GW capacity. 100% utilization. Outsourcing is no extra cost now.
• High-end datasheet module metrics on conversion efficiency, temprature coefficient and low light efficiency