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explo

Income and Balance-Explo's Thread

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It seems to have stabilized at 140 yuan past month. Horrible for everyone?

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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).

post-8-137461384007_thumb.jpg

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Guest Klothilde

Oh Baby Jesus please come to my rescue! We are free falling! Worse than SOL share price!

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Guest solarcat

GCL - 65,000 MT, utilization=?? OCI - 62,000 MT, utilization=?? Walker - 62,000 MT, utilization=?? Hemlock - 56,000 MT, utilization=?? Together the big 4 account for 60% of GLOBAL polysilicon capacity. So what was their combined utilization in Q4?

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Guest Klothilde

Your are right on that one. But then again, you and I know what the sustainable poly price is.

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Hi Klothilde, it seems neither you nor explo had this one right? Still feeling for over $30 per kg is coming up

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Guest Klothilde

Yes, on dec 31 2013 you will see poly >$25 and next year it is heading >$30. This is not a lame guesstimate but the result of matching supply and demand at a pretty granular level.

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Yeah, I am sure we will review this one for accuracy, since past experience commands it. any way, since poly is not going any near $25, I would estimate that pricing will remain flat in 2014. Anyone building plant or upgrading the plant will set their objective to be profitable at $20, in my opinion, and activity seems to focus on costing structure not the demand structure. This will permanently set industry costs for poly, until GCL will produce at range of $10 per kg. This will create another OMG situation for all the players.

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Guest Klothilde

Do you think many poly players are building low-cost poly capacity or upgrading existing units to lower cost significantly? I don't think so. So contrary to you I regard the poly supply curve for 2013/2014 largely static. But hey, if you have info to the contrary just throw it on the table since I'm more than willing to change my view. Bottom line I would welcome cheaper poly for the planet's sake. And with FBR it is coming our way. We only need to find investors who'll dish up the money.

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As you recall, my view involves statement that we are in the case of the oversupply when all the capacity is turning on poly (the one below $20). This makes the supply/demand flat for me in 2014 even with the demand increase. My view factors lower intake of poly per watt, less waste, less kerf, and recycling efforts at manufacturing plants. There are at least 30K MT, which are potentially coming on line in next 18 months including Japanese, Korean and Taiwanese operators. All of them are in $15 range. In addition I believe there is a substantial amount of polysilicon in inventories across the globe, perhaps somewhere in line of 50 to 100K MT

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Guest solarcat

Hi Klothilde, it seems neither you nor explo had this one right?

We are only in month 4 of a 12 month year. Anything can still happen. This could be the pull back before the next leg up. We are only 1/3 of the way in.

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Guest nanofrogfish_spf

I’ve got a really big smile on my face right now. :) The reaction (or rather lack thereof) to the whopping almost 5% spike down in poly prices over the last week, was very interesting to say the least. Poly goes up a half a %, and there’s endless posts after posts of Spiking and Surging and To-the-Moon dreams that only a couple companies would benefit from, at the detriment to all the others of course. But when it goes down 10- imes that much...well you could hear a pin drop...even though this is a HUGE positive to most companies. I wonder why that is? But now of course it’s all about something else... I never for one minute believed that any part of the solar value chain would increase that significantly...now or ever...the overall market dynamics just will not support this. One company was promoted relentlessly...while bashing all others. One person stood up to them and slowly, but surely, has been proved 100% right to this point...all because of his factual approach to the overall market dynamic, especially in China (not just trying to extrapolate micro-calcs, whether they are accurate or not, to an entire industry dynamic). And due to the factual approach to the individual companies performances and manufacturing capabilities. And there’s no doubt in my mind, or I’m sure anyone else’s on this board, that he is the most knowledgeable poster on this forum when it comes to the overall global and dynamic solar industry. Of course I’m talking about Odyd. My personal thanks to you Odyd for all the time you spend separating fact from fiction, and for sharing that with the rest of us... I hope in the future solar investors on these boards will think twice before blindly drinking the super-sweet pumpers’ kool-aid, especially when it flies straight in the face of what Odyd sees is really happening inside the industry...and especially in China. So why the big smile? :) ...primarily because Odyd is being vindicated again, but also because at this point it still looks to me like I've placed my bet on the right horse... And please don’t get me wrong...I think many of the 12 will do well...it’s just that the expectations of what was to come far exceeded the reality of the present market dynamics... All IMHO of course...

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Guest redsolar

There are more SOL investors on this forum than any other ticker. So...obviously..there will be more posts on SOL..if something goes in favor to SOL...than would have otherwise been the case like CSI or YGE. This is quite natural...and there is no reason to laugh at them.

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Keep it relevant redsolar, I do not see anything relevant to SOL here or your observation.

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And please don’t get me wrong...I think many of the 12 will do well...it’s just that the expectations of what was to come far exceeded the reality of the present market dynamics...

did you make a mistake saying 12 or you are including SPWR and FSLR in the group?

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Guest eysteinh

"Poly goes up a half a %, and there’s endless posts after posts of Spiking and Surging and To-the-Moon dreams that only a couple companies would benefit from, at the detriment to all the others of course. But when it goes down 10- imes that much...well you could hear a pin drop...even though this is a HUGE positive to most companies. I wonder why that is? But now of course it’s all about something else..." Actually its down less than it has spiked since the bottom. Get the facts correct. Second of all once you look into the details of the current trend of downward prices you see that gcl poly is still offering trade prices of 144000 yuan per tonn so they are standing still in price. I belive most of the price drop was from western polysilicon producer selling cheaper because the expected tariff was delayed back. (rumors of end of june now.) No doubt that trade prices are a good indicator and that I think we could look into a few weeks of lower poly prices. But the trend for the year will be put into motion once the tariff is cleared or not. "I never for one minute believed that any part of the solar value chain would increase that significantly...now or ever...the overall market dynamics just will not support this." I am in the camp beliving poly prices to increase. There is not a single producer that earns money on polysilicon under 20$/kg. Not a single one. You cant just look at production costs when you have to factor in all other costs too. If you look at utillity levels for 2012 there was a lot of scaleback: Rec 99,56% utility Gcl 57,01 % utility Wacker 73,08 % utility Rensola 35,22 % utility Daqo 49,45 % utility Oci based on revenue and average asp drop around 95-100% utillity. If you start to calculate based on actuall production numbers and estimate this at same levels for 2013 you end up with 221812 MT of production at cost under 21$/kg (production costs, not added opex costs or interest costs etc.)

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Guest nanofrogfish_spf

did you make a mistake saying 12 or you are including SPWR and FSLR in the group?

funny...I was actually just following Kloth's lead on this one...I saw where he posted "12", so I figured why not throw FSLR in there (after all we're all in this together ). After thinking about it, I think I'll go back to the solar 11...but that includes both FSLR and SPWR, taking the place of the bankrupt STP and LDK....(excluding the US companies, I guess we have the Chinese 8 plus 1 Canadian, which I'll just combine for convenience in the future as the Chinese-9).

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Guest Klothilde

Can we kick out CSUN out of the solar 11 and make space for REC as well? Let's not be nationalistic guys, I think we all can agree that REC is a better pick than CSUN, can't we?

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Guest solarcat

Real funny hearing people saying that anyone was right when in fact we just finished the first quarter. I thought the idea was for poly to get to $20+ but not over $25 in 2013. If however someone else put April 19 as the do or die day that poly had to be over $20, all they had to do is post a link to that post. Otherwise, wait at least after Q3 to talk about who was right. BTW, great post by eysteinh.

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