Doing well in Greece

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Thursday, February 14th 2013, 7:50am

Quoted from "littleguyintucson"

The problem with SOL is that a majority of their product shipments have been wafers. These have been selling at a gross loss for a year. The current high end spot price for Multi wafers indicates $0.25 ASP. SOL guidance is $20 Poly and $0.12 processing. This places their cost at $0.23 and a $0.02 gross profit if you presume high end. That $0.02 gross is 8% margins but a shortfall of $0.05 per watt from their Operational expenses. Their module ASP needs to garner $0.15 gross to offset he shortfall in wafer gross. Under current ratios of module to wafer shipments and costs and pricing conditions, this does not happen for several quarters unless volumes pick up far above current shipment levels.

The gross margin on wafers in Q4 and Q1 is obviously not the basis for a long position in SOL. Everybody knows that there's nothing more depressed than poly and wafer 12Q4 (Q4 financials play: short wafer makers, long wafer buyers). SOL doing well despite that is the case (vs LDK). Once poly and wafer normalize and SOL's poly is upgraded to 18 $/kg cost end of March, they'll be in a very strong position.

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littleguyintucson

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Thursday, February 14th 2013, 9:18am

The gross margins is a long term issue for sol on wafers Here are just 2 reasons.

1: YingliSolar is guiding sub $0.40 processing entering into 2014. My speculation is they will be mid $0.30's average in 2014. Poly at $0.10 is a $43-$0.48 module in 2014 with $0.48 the high end average. Wafer processing cost of $0.11 puts $0.27 or less on cell to module. If you believe most reports, costs are now at the $0.13 for cells and below $0.20 for modues. In order for SOL customers to be competitive, they need a cost structure of below the branded $0.48 Yingli. This requires an ASP of $0.22 or less. At $0.12 today, and the future $0.10 with $18 Poly gives you a $0.18-$0.20 cost and $0.02 to $0.04 in gross margins. This is not enough to cover interest and Opex targets of $0.07-$0.08.

2: GCL the 5x the size competitor will have loaded Poly at $14/KG and $0.06 in Si costs with wafer processing targets below $0.10. They will make $0.06 in 2014 at a $0.22 ASP and will have lower operational expenses per watt due to mass of scale.

3: When all said and done, LDK Poly will be a privately owned company a subsidiary of a bank that will have zero debt and an asset value at $30/kg with cash costs with subsidies below $10/kg and $3/kg in depreciation. They will be able to sell Poly at $20/kg

While SOL may get a slight bump in gross profits as they turn positive, you can expect market pressures and costs to keep the upstream wafers and Poly at lower costs and limited profits. This is why the project development and module business is critical for profits

imho

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explo

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Thursday, February 14th 2013, 9:41am

Quoted from "littleguyintucson"

The gross margins is a long term issue for sol on wafers Here are just 2 reasons.

A lot of factual statements there. "LDK Poly will be a privately owned company a subsidiary of a bank that will have zero debt and an asset value at $30/kg with cash costs with subsidies below $10/kg and $3/kg in depreciation. They will be able to sell Poly at $20/kg"

Eh, ok..? So SOL will suck and their competitors will not. Plus competitor owners will change strategy to charity for cell makers instead of selling produced goods at prevailing market prices for their tier rank. In that scenario I would be short SOL too.

It's not about being in the right part of the value-chain (then everybody would be in the same part and the chain would fail - these dynamics gravitates towards balance). Who ever is best-in-class in the part of the chain they operate will be able to collect profits there over time. Those able to be best-in-class in multiple places of the value-chain will be able to lower profit margin volatility as well as accumulate more profits. Simple, but real, nature of business. No free lunches or easy money.

Just one more thing on the chain. 2012 was the year of project construction. 2013 will by force of economic balance move margins upstream again. Retailer margin have been compressing in January as poly margins have expanded. So it will likely still be a good state for downstream in 2013, but less of a good trend.

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larryvand

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Thursday, February 14th 2013, 4:21pm

littleguyintucson, we heard all that in 2012 for GCL and LDK. Instead, GCL posted massive losses and 50% utilization. I won't even mention LDK as in any other part of the world they would already be bankrupt. Their customers definitely already think they are bankrupt by the way sales of wafers and modules at LDK nosedived. And I do mean nosedived.

So let's talk about GCL, considered by many the big gorilla at the beginning of 2012 with "supposedly" the lowest cost poly. Well guess what? SOL looked them in the eye and kept beating them in every way. Best & lowest cost HP wafers, 100+% utilization and 250% higher module shipments.

But you are telling us that 2013 or 2014 is going to be different. Yeah, it is going to be different alright... SOL will have the cheapest poly around with $15/kg cash cost and their HP will hit 20+%. And if poly gets to $25-30/kg, they will make a mint.

BTW, LDK has left a lot of bodies around. Most of their customers don't want to do anything with them. But somehow you think them going private is going to make it alright with their customers and arbitration lawsuits and only SOL will suffer but GCL will welcome them with open arms as a competitor. Yeah right. LOL, too funny.

This post has been edited 1 times, last edit by "larryvand" (Feb 14th 2013, 4:27pm)

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Boss

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Thursday, February 14th 2013, 4:52pm

Well Yingli has higher opex and interest then SOL.
SOL will not be a wafer supplier in 2014 anymore. SOL will sell more module then wafer in 2013.
SOL can easy buy the newest cell lines a beat any existing manufacturer in 2014.

My money is on SOL. Lets see in 12 month where SOL,GCL or Yingli stock prices are.

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ILOVEPV

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Thursday, February 14th 2013, 5:15pm

fruitful and useful discussion. Thanks guys. I'm not such an experienced investor as most of you (in this specific area) but my gut feeling (that works almost always) tells me that SOL is the best candidate for the time being. It does not mean that SOL shares will be appreciated on a timely basis but it means that in a final analysis SOL investors should gain more than others. When I look at 11 solars trading pattern I see a very bullish stance on JKS and SPWR while SOL behaves like somebody caught her tale not allowing to move. My trading experience tells that such a behavior is a direct indicator of a massive accumulation that started a little late. On a top of it take a look at a short interest. Actually SOL's SI is the low enough (compare to shares outstanding count) and can be easily covered within 2-3 big volume trading days. Those 15-20M volumes days are all ahead.

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MichaelZhao

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Thursday, February 14th 2013, 6:12pm

Quoted from "ILOVEPV"

while SOL behaves like somebody caught her tale not allowing to move. My trading experience tells that such a behavior is a direct indicator of a massive accumulation that started a little late.

I agree with this, I had the same feeling. Looks like the accumulation just finished last week, we should see SOL quickly jump up to $3 level if my assumption is true.

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littleguyintucson

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Friday, February 15th 2013, 8:06am

Quoted from "Boss"

Well Yingli has higher opex and interest then SOL.
SOL will not be a wafer supplier in 2014 anymore. SOL will sell more module then wafer in 2013.
SOL can easy buy the newest cell lines a beat any existing manufacturer in 2014.

My money is on SOL. Lets see in 12 month where SOL,GCL or Yingli stock prices are.

Yingli costs are vertically integrated. SOL is primarily wafers. SOL has traditional single vertical costs and thus lower Opex. Yingli will drive costs to sub $0.10 fully vertical while SOL's Opex will increase as they move to a more vertical model. If they do not enter the Cell manufacturing, any Opex savings would be lost by cash flow and tolling costs.

My argument was not that SOL is a poor company, my argument is that costs of competitors will force SOL ASP to stay low in order to compete. This will temper ASP rise, while potentially short term there might be a bump, longer term there will not be.

LDK tried to force their customers to take higher cost goods than competition. Where are most of LDK customers today? In arbitration spoon feeding them $30M judgement findings while those same companies file for bankruptcy.

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explo

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Friday, February 15th 2013, 8:32am

Quoted from "littleguyintucson"

My argument was not that SOL is a poor company, my argument is that costs of competitors will force SOL ASP to stay low in order to compete.

But what you say here is that SOL is not very cost competitive. That's where our views differ. SOL will have 16 cents cash cost to make HP wafers. So they'll be at level of best-in-class for wafer makers with in-house poly and beat every wafer line that doesn't source poly internally. They get 3 cents tier 1 wafer maker premium and another 4-8 cent HP premium (HP wafers lowers cell and module processing costs per watt too not just BOS cost per watt, so HP premium is higher in absolute cents on the wafer level than on the module level). SOL will have one of the most profitable wafer lines in the industry. Remember that price is set by the cost to produced the last demanded unit. There are not 35 gw of wafer capacity with lower cost than SOL.

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larryvand

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Friday, February 15th 2013, 9:10am

Quoted from "littleguyintucson"

LDK tried to force their customers to take higher cost goods than competition. Where are most of LDK customers today? In arbitration spoon feeding them $30M judgement findings while those same companies file for bankruptcy.

But somehow you think all that will be forgotten if they go private??

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littleguyintucson

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Sunday, February 17th 2013, 6:17am

Quoted from "larryvand"

Quoted from "littleguyintucson"

LDK tried to force their customers to take higher cost goods than competition. Where are most of LDK customers today? In arbitration spoon feeding them $30M judgement findings while those same companies file for bankruptcy.

But somehow you think all that will be forgotten if they go private??

Under new ownership with connections,yes

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larryvand

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Sunday, February 17th 2013, 9:00am

Quoted from "littleguyintucson"

Under new ownership with connections,yes

May I remind you that current ownership has had lots of connections and that didn't work very well for them. Part of the reason is because HP wafer mass market low cost technology is not part of LDK, private or not. Debt or not. Price of poly and debt levels are not the only problem of LDK. Their R&D and technology is mediocre at best. But somehow you think what they could not accomplish with engineers and scientist and $8 billion all these years, will miraculously happen by going private.

And from this tread Oh my goodness: Wacker ramping up production
you can see that price of poly is only a small part of the equation.

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explo

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Wednesday, February 20th 2013, 2:54am

Now it is officially announced by Renesola:

http://phx.corporate-ir.net/preview/phoe…6638&highlight=

This shows that you can take a big position in smaller emerging markets with the right overlap between market requirement and your product portfolio offering. For Renesola their high performance in hot climates have rendered interest in Australia, Greece, Spain and Saudi Arabia for instance. Remarkably they have very strong performance in cloudy condition too. They can push different differentiating product values in different geographic markets this way. The high conversion efficiency and micro inverters optimal handling of partial shading and BOS costs overlaps with the residential segment which dominates some markets.

These overlaps between distinctly different market requirements in the different markets and the value propositions of the product portfolios is said to be a theme for 2013. SOL have lined up perfectly for this scenario.

Meets the increasing global "high efficiency only, thanks" requirement. SOL only makes high power modules now, contrary to 2 years ago when their modules had crappy power ratings.
High performance in real conditions like hot, cloudy and temporary shading. SOL outperforms outside lab STC conditions. Lower degradation during initial operating year.
Tailored kits with micro inverters, string inverters, power optimizers and storage solutions (the two former already launched, the two latter to launch in 2013).

No big brand to claim share in different markets the old way. Instead they will claim them through fitting value proposition. New module brand is helped by being a tier 1 wafer maker since many years (powering many installed tier 1 modules). This is more of a company than module quality stamp though.

Other solar 11s have quite a lot of values too, but SOL ticks most boxes, especially when looking at 2013 themes, which is remarkable for a module newcomer. For competitors it's often the high end expensive lines that come close to the temperature coefficient and low light condition efficiency of SOL's low cost offering.

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Boss

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Wednesday, February 20th 2013, 3:32am

100MW just in 1 Q to Greece is quite an accomplishment. Go SOL.

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Klothilde

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Wednesday, February 20th 2013, 5:37am

Quoted from "explo"

...SOL only makes high power modules now...

Do you know what fraction of the HP multi wafers they produce for their modules end up converted into 250-260 Wp modules? Can it be that a fraction of the HP cell production (either own or through tolling) is not efficient enough for 250-260 Wp modules and just gets sold off as cells?

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explo

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Wednesday, February 20th 2013, 7:25am

Quoted from "Klothilde"

Quoted from "explo"

...SOL only makes high power modules now...

Do you know what fraction of the HP multi wafers they produce for their modules end up converted into 250-260 Wp modules? Can it be that a fraction of the HP cell production (either own or through tolling) is not efficient enough for 250-260 Wp modules and just gets sold off as cells?

They haven't indicated in any way that their modules would not exclusively use their own wafers, so I'm assuming that's the case. Their module capacity is only 60% of their wafer capacity, so they might use the best wafers for their modules, but with 60% and worst case module being 250w, their wafer average must be high.

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odyd12

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Wednesday, February 20th 2013, 7:55am

Quoted from "Boss"

100MW just in 1 Q to Greece is quite an accomplishment. Go SOL.

From November 2011

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larryvand

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Wednesday, February 20th 2013, 8:29am

Building module capacity is very inexpensive so I can see SOL having 2GW module capacity by the 2nd half of 2013. Maybe even earlier.

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Pop2mollys

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Wednesday, February 20th 2013, 9:00am

Buy any dip on SOL... 2.70 level is a gift... Over 3 very soon...chart just warming up

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Pop2mollys

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Monday, March 4th 2013, 9:09pm

Quoted from "explo"

http://translate.google.se/translate?hl=…renesola-95858/

Quoted from "larryvand"

Quoted from "Boss"

Good to see SOL is No.1 in Greece.

And not just #1 in Greece. If you read the PV-Mag article that odyd posted, SOL is #1 in Greece and #1 in the U.S.. And IMO, being #1 in the U.S. is huge, especially if you consider that Renesola was non-existent in the U.S. 12 months ago. Kudos to SOL's management. They have transformed a wafer company into a module gorilla almost overnight. They really have used the 2012 solar implosion to their advantage in a way that I could never have foreseen back in 2011.

Just oit Greece set to fast track solar projects.... This is becoming an explosive market that no one is talking about. And guess what SOL own Greece....

http://translate.googleusercontent.com/t…Q3mwGJlpg9ajqEg

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