29 replies to this topic

[eysteinh]

Edit: Updated 16th may with more interest costs. 

 

So hopefully we can make our estimates here and come to a good conclusion before 27th may. Here is my estimate:

(all numbers rounded up)

 

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Operational sales of modules: 455 MW @ 0,61 cost 0,48 = 59 mil usd.

Feed in tariff income: 5 million usd.

Income from retainage, wafer sales and cells: 3 million usd.

Gross: 67 million usd. 

 

Operational expenditure: 39,5 million.

Interest: 10,3  million

Tax loss/gain: loss of 1 million.

Currency loss/gain: Loss of 5 million.

 

Net profit: 11,2 million usd. 30,3 million average weighted shares = 0,37$ earnings per share. This compares with a mean of market watch 5 analysts of currently 0.4 and is lower than high end of 0.6.

 

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Notes: I have not calculated any effect on the bond convertible. 

 

Comments. ASP down from 0.64 to 0.61 globally for Q1. (end of Q1 the price decline started) Cost is assumed stable as I feel we will get a 1 cent increase in polysilicon cost while they will reduce 1 or 2 cents in costs.  When it comes to opex it is very high compared with the statement from the conference call that opex will be around 10% of revenue (but I like to be conservative): 

but definitely for 2014, we will continue -- I think as the revenue continue to increase and where we I think the operating expenses stick below 10%, that’s our target.

 

(source http://seekingalpha....ipt?part=single ) 

 

Whole year estimate (I have upped opex to be even more on the safe side):
https://drive.google...dit?usp=sharing EPS estimated at 3,73$/share.

As you can see these are some seriously conservative estimates. I have assumed asp to at one point drop as low as 0.59 (Q2) that is 5 cents lower than asp was in Q4 2013. Opex if actually 10% of revenue should be 143 million while I have estimated 195 million so just here there is a 52 million upside. Then when it comes to feed in tariff actual feed in tariff at 60% gross margin should be somewhere close to 30 million just for the projects from 2013, I have added 27 million and not even assumed any income from the 400 MW connected in 2014 (upside potential clearly as even if only half of this is paid that is another 30 million usd.) When it comes to wafers I have assumed 10% wafer/cell sales and 4 cents margin thats a total of 9 million and there is clearly an upside from selling 230 MW of wafers and cells with a 4 cent profit.

 

Conclusion: Even in my worst nightmare of an estimate I get EPS at 3,73$/share whole year. Defending a share price of 37 at P/E 10 or more properly for a company in growth a p/e of 15 with a share price of 55. And it only gets better into 2015 and 2016.

 

Reference material:
Q1 reaffirming outlook: http://phx.corporate...7269&highlight=

Q4 result: http://phx.corporate...5169&highlight=

Marketwatch estimates for JKS Q1: http://www.marketwat...shot&pg=analyst

Q4 conference call transcript: http://seekingalpha....ipt?part=single

[BIPV Investor]

If they report 42 cents per share, they are going to get crushed. guidance wont matter as the traders will step in. Depending on China ASP, average ASP might be a cent higher, but I'm unsure as Jinko has been moving product at fire sale prices.

[eysteinh]

Why would they be crushed at 0.42$/share ? Thats a great earning and perfectly on track for the year and for a low P/E valuation currently. And it is market leading of the chinese peers. By the way as I am damn conservative in these estimates I would not be suprised if JKS beats my expectations.  Anyhow instead of discussion who will be crushed and whatnot why do we not just stick to estimates in this thread? 

[BIPV Investor]

What did Jaso just report with a PS that is only 40% of Jinko's and a market cap less than book value? Having a substantial EPS decrease q/q will play right into the narrative that solar stocks were a 4Q flash in the pan due to China demand.

[eysteinh]

Sure you can spin it that way but that is not what is unfolding and q2 guidance will show that.

 

I hold for years not quarters once I found a great company at great value. (I did with REC.)  Jaso can do 2$/share and that is in a normal scenario. JKS will get almost 4$/share even if I put all the bad stuff I could think of into my estimate. And thats before the share issue of projects in end of q4 starting 2015 when the real firework starts. Make no mistake about it both companies are great value, but I find more value in JKS than JASO and more sure value as JASO could go down. If I do same asumptions in lower ASP as I do for JKS then JASO would not be at 2$/share to put it mildly. (try putting 4 cents less asp for jaso and almost none of the project income they are actually getting and increase opex with some 20-30% and assume very small % sale of cells and see if you get those kind of numbers as I can get with JKS doing the same scenario.) Now I am not saying JASO is terrible at all, in fact if things goes well (and it very well could as mono prices has been stable) they will print great eps as well. But I prefer JKS that will do great even if things goes bad. 

 

Anyhow, I want estimates on JKS not discussion about what share prices are going to be. It is fine to say your estimate and then what share price you think that defends, but to start a discussion about what will happen and how some will make a news or not has nothing to do with an estimate. I do not own this forum but if we are going to discuss trade / share prices here count me out of any further discussion on estimates as that is what I want to discuss. 

[BIPV Investor]

Ok. Thanks for the estimate as I greatly value your contribution and highly respect your estimates as time and time again they have proven to be very accurate. Sorry it I came across attacking you or JKS.

[eysteinh]

Thanks for those words. Anyhow hopefully others have estimates as well. I kinda missed with jaso when i said 0,15 and up to 0.25. Frankly I had no clue of the one offs and that was lucky I got into the range even.  Same with JKS I have no clue of the one offs in say the convertible bond, but the other parts of JKS I have tracked pretty good so far and since the one off is not a cash effect that is not that big a deal for me that I dont know it.  

You might be right Q1 could be spinned in a wrong way with lower EPS, but hopefully the market sees past that as JKS will in my opinion do great every quarter. If not it could be a good buying opportunity in my mind (but make up your own mind) if market decides to take them down further. Since I do not trade a position once I have bought it at what I feel is a good value then I am not trading out of the stock. But it only happens very rarly once I have found true value. I did with REC some 3 years ago and I see the same now with JKS. Only thing that could ever force me to trade was if my child we are having now had problems and we needed money, but apart from that I have no pressure to ever sell. 

 

So yeah anyway, hope we can have more estimates. 

[odyd]

One thing for sure Eyes, this market does not have a vision of seeing beyond and in fact it looks only beyond at negatives like lower GM. BIPV represents probably the best market perception. JKS reporting anything in the range of below $0.50 and not in the range of $0.75 to $1, would be perceived as weak. I think there will be a GAAP gain on price of CB, which can add a good chunk, I am not sure how big, but substantial.

JKS must stay in range of $0.75 per share otherwise we will be diving. I see that CSIQ provides even greater risk of it (diving).

[explo]

Look at JASO reporting $0.41 non-GAAP net profit per ADS. Even though it was trading at $10 it got crushed when reporting $0.41 quarterly EPS without any project sales help (which it will have in later 2014 quarters). That just says that the market pressure these names in ways we can't imagine. I remember in 2011 when we asked ourselves questions like "Ok, they pushed JKS below PE 3 now, they can't go lower, right?". In the end it was pushed below trailing PE 1 I think, but at that point the market was right about profits going to get squeezed. Now I don't see such squeeze on the horizon, so the mother squeeze of 2011 can't happen right imho. Remember that pushing JKS from $35 to $25 is a breeze in 2011 they pushed it from $35 to $2 in 2012 bottom with even higher trailing profits printed. I think this is what is in BIPV's mind and a bit unreal to Eys as he entered CN solar names after the mother squeeze I think(?). That said I think BIPV is wrong and Eys right here, but if BIPV is right then one need a strategy robust against events like CSIQ and JKS trading at single digit a year from now.

[sunnysky]

My mid-range estimate is:

 

GAAP EPS          = $1.24

Non-GAAP EPS  = $0.74

 

At the lower end:

 

GAAP EPS          = $1.11

Non-GAAP EPS  = $0.61

 

At the high end:

 

GAAP EPS          = $1.36

Non-GAAP EPS  = $0.86

 

All assume $16 M from derv gain (no loss due to excess value as explained a few times) and no FX loss/gain.

[odyd]

No Explo, this is not about BIPV being right. Market expects greater result than $0.42 per EPS, this market does not take lightly that you get your main pies in Q3 and Q4. Whether we like that is irrelevant. Assume PE is 10, so they need to get somewhere around 2.7 per share. If they get $0.42 what do you think this market will do? They need to guide at least $1.30 or so for Q2, but they do not guide EPS, so one word of lower GM like JASO and what happens?

Besides JKS has history of earnings spanning almost a year now.

[eysteinh]

Explo I bought REC to early and went down 70% of my cash with it. I still knew I was right and sure enough 2 years later I was up some 200% from my starting investment. Lousy timing by me to buy too early as I saw what was happening in the market already then too quickly, but still it tought me to be patient. I did a lot of things to defend my value at that time, even going as far as almost getting into the board of rec. (i got 3% of votes, all of the minority owners wanted me in) and even making a media debate that caused one of the share issues for rec to be a bit more fair to small time owners (they increased the number of shares all stock owners not participating in the direct issue could get.) Anyhow to make a long story short I think I have been through a lot of things in the solar sector my last 5 years so I know of ups and downs. 

Also regarding JASO, yeah they should be up based on these numbers - but market speculates if the earnings is sustainable if prices keep dropping. it is short sighted imho.

Anyhow I ment what I said I wish this thread to be about estimates. Its a good discussion but hopefully we can have estimates here? 

[odyd]

My mid-range estimate is:

 

GAAP EPS          = $1.24

Non-GAAP EPS  = $0.74

 

At the lower end:

 

GAAP EPS          = $1.11

Non-GAAP EPS  = $0.61

 

At the high end:

 

GAAP EPS          = $1.36

Non-GAAP EPS  = $0.86

 

All assume $16 M from derv gain (no loss due to excess value as explained a few times) and no FX loss/gain.

Can you show the component of that revenue?

[eysteinh]

Thanks sunnysky. Given the discussion I hope your right as even if I hold long term it is always emotionally draining to watch your value go down (even if you know your correct.)  I guess the market could be stupid enough to not put 1+1 together. (Just look at trend last 4 quarters - do they think that is magically going to disappear?) 

[explo]

No Explo, this is not about BIPV being right. Market expects greater result than $0.42 per EPS, this market does not take lightly that you get your main pies in Q3 and Q4. Whether we like that is is irrelevant. Assume PE is 10, so they need to get somewhere around 2.7 per share. If they get $0.42 what do you think this market will do? They need to guide at least $1.30 or so for Q2, but they do not guide EPS, so one word of lower GM like JASO and what happens?

Besides JKS has history of earnings spanning almost a year now.

 

I expect $1, so $0.42 would mean trouble and be an excuse for the market to push the stock down, but to keep pressuring JKS to single digit there need to be a viable story about declining profits. Right now I see growing profit through the year.

[odyd]

Then let's agree, JKS prints $0.42 we need find something to do in a day time or it will be very depressing for ample time to come. Sunny you looking at mid $20M net, I hope you are right. I am thinking that JKS will do in the area of $0.75 on GAAP with a huge contribution of CB price.

[explo]

Eys, just to clarify I'm with you that Jinko is a great company set for long-term success, but as long as it trades on NYSE it can from time to time be pushed far far below this long-term success value.

 

US stock exchanges works like this: If it is sunny outside short the umbrella makers with both hands as there's a viable FUD story to US retail investors that it might never rain again. After some shorting during a sunny streak they'll cave to this belief and the shorts cover and go long at prices close to $0 and make tons of money as the sky release what was pending all along.

 

You therefore need a portfolio strategy that is robust against this absurd behaviour where price completely disconnects from long-term value based on the daily weather forecast scare.

[eysteinh]

I still stand by my words that 0.42 actually is a great earning and on track for the year, but given that mr market for sure have been known to not have a clue earlier so yeah it could be worriesome if you trade in the stock. Hopefully my conservative estimate will be beat. Anyhow I have 3 cent drop in asp but the drop actually started last month of q1 so we could easily see more asp than this causing my estimate an upside. Every 1 cent is around 4,5 more profit or around 0.15$/share.  If I look back at solarzoom the drop started 19.02 from 0.677 to 0.65 and it remained at 0.65 levels until very last week of Q1 where it dropped to 0.62. So that global asp for jks will drop 4 cents might be way to conservative given JKS has maybe at most half shipments to china and half of a 2 cent drop would be only a single cent drop in asp. Globally prices dropped (pvinsights) from 0.696 to 0.664 end of quarter with a gradual decline suggesting 1.5 cent lower price globally. (3 cents end of quarter but average of quarter roughly 1.5 as the decline was gradual over the whole quarter.)  So it might be more correct to assume a 2 cent drop for jks not 4 cent drop as I have assumed. 

But I prefer to be conservative and be happily surprised. Even with my conservative numbers I have jks at 3,73$/share whole year and there is definitively upside to that. Thats why I sleep calm and know I have a good value buy as I have put pretty much all the bad things into that estimate and still it is a great result. 

[odyd]

I think I agree with you as well Eys, about operational earnings being in the figure of $0.50 range, but I am adding CB gains on the top, to show GAAP.  This will be the figure to matter to market. I cannot imagine anything lower than $0.75 GAAP, and not to hurt the stock.

[BIPV Investor]

I think I agree with you as well Eys, about operational earnings being in the figure of $0.50 range, but I am adding CB gains on the top, to show GAAP.  This will be the figure to matter to market. I cannot imagine anything lower than $0.75 GAAP, and not to hurt the stock.

 

Not to hijack the thread, but what is your estimate for Trina as you've turned quite positive on them recently based on CEDR data.