SunEdison (SUNE), formerly MEMC Electronic Materials, is a major player in semiconductor and solar technology industry globally. SunEdison's semiconductor business has been a path breaker in the design and development of silicon wafer technologies for over half a century. With operations in the U.S., Europe and Asia, SunEdison leads in developing the next generation of high performance semiconductor devices. SunEdison's solar business produces, finances, installs and operates distributed power plants for commercial, government and utility customers. SunEdison's common stock symbol changed from WFR to SUNE as of June 3, 2013.
SunEdison's solar division has a huge opportunity ahead. It is estimated that $1 trillion is going to be invested in solar from 2013 to 2020 worldwide. The market for providing electricity to rural areas globally is around $40 billion annually. In addition, there is a $200 billion market for solar irrigation pumps in emerging countries. The recent increase in construction activity in the U.S. bodes well for the solar business. During the latest quarter the company grew both its pipeline and backlog. The Semiconductor Materials division has undergone transformation and is showing growth in revenue again. The division is profitable on an operating basis, benefiting from the renewed revenue growth and restructuring from the transformation.
SunEdison is an exciting company that combines a Semiconductor Materials business that underwent transformation with a Solar Energy business with a great growth opportunity. The Semiconductor Materials division's transformation improved the cost structure of the company, as well as quality and market share.
In the solar space, it is estimated that $1 trillion is going to be invested in solar from 2013 to 2020 worldwide across all channels and geographies, driven by a significant reduction in solar cost. The company has a leading platform that is comprehensive in technology, development, capital and services. According to a recent report, the market for providing electricity to rural areas globally is around $40 billion annually. In addition, there is a $200 billion market for solar pumps for irrigating in emerging countries.
This report discussed the huge opportunity for improved energy services at the household level and in the energy access business: $37 billion is spent annually on low-quality energy solutions at the household level for fulfilling lighting and cooking needs. Rural parts of many developing countries need affordable sources of energy for irrigation and basic necessities. There are thousands of such rural areas where efficient players in the solar space will benefit from this need. SunEdison secured the first project in India in 2010 (it now operates in eight Indian states), and has grown to other Asian regions such as Thailand and Malaysia since then.
As a demonstration of confidence in the business, the company's management is buying in personal accounts. The company's CEO, Mr. Ahmad Chatila, purchased an additional 68,100 shares on the open market recently.
SunEdison is a global leader in semiconductor and solar technology besides being a solar energy services provider leading through innovation. SunEdison develops and supplies innovative, advanced technology solutions to corporations, utilities, governments and leading chip manufacturers. With R&D and manufacturing facilities globally, the company is a world leader in technology throughout its business.
SunEdison's two business segments had divergent results in the latest quarter. The company grew revenue in its Semiconductor Materials segment and had positive cash flow despite a continued industry slowdown, and the company expects performance to improve through the year. Sales in the Solar Energy segment were down as the development spending rate fell last year. The recent increase in construction activity should produce better results later this year. During the latest quarter the company grew both its pipeline and backlog. Free cash flow was ($110.6) million and was largely influenced by solar project construction costs, capital expenditures and repayments of solar energy project financing. Capital expenditures were $30.8 million.
Semiconductor Materials Segment
Semiconductor Materials revenue was up 6.4% year-over-year due to increased volume across all diameters in spite of price declines and an unfavorable mix. Year-over-year prices fell across most diameters, with the large diameter product prices falling the most. The weakness in the Japanese yen contributed to lower pricing. Volumes increased year-over-year in all diameters, with the large diameter products increasing the most. In the latest quarter the small diameter product increased in volume though prices continued to fall. However, from customer order patterns, pricing seems to have stabilized and volume should further increase through the remainder of the year.
The Semiconductor Materials segment increased operating income due primarily to higher gross margin and profits driven by increased shipments and lower costs as a result of the company's restructuring efforts. Segment operating income was down sequentially due to lower pricing and a $4.6 million restructuring benefit recognized in the 2012 fourth quarter.
In the 2013 first quarter, Analog Devices awarded MEMC the "2012 Supplier Excellence Award" for outstanding quality, service and support by its Semiconductor Materials segment.
Solar Energy Segment
The Solar Energy segment's 2013 first-quarter revenue declined year-over-year due to reasons like fewer megawatts sold and lower solar materials sales. Revenue fell from the fourth quarter of 2012 to the first quarter 2013 due to reasons like lower solar project and solar materials sales, and the recognition of deferred revenue in the 2012 fourth quarter related to a previously sold solar project.
Technical Analysis By Harry Boxer
The following technical breakdown is by Harry Boxer of TheTechTrader.com:
SUNEDISON Has had more than a 100% move just since mid April and has reached a KEY double resistance zone at the top of the year long rising channel and at lateral resistance going back 5 years. As a result, a pullback/ retest had been expected and is now underway. Having moved from 1.44 low in June of last year to nearly 9 just this week, we feel SUNE needs to at least consolidate those gains before its able to take another leg up. Looking at possible support for the coming retest, 7.50, 6.75 & 5.50 appear to be points to consider for accumulation of a position with targets near the 10 & 14 zones.
For the second quarter 2013, the company expects Semiconductor Materials revenue to grow to between $235 million and $245 million and Solar energy systems total non-GAAP sales volume in the range of 29 MW to 54 MW. Capital spending is expected to be between $30 million and $40 million.
At the end of the 2013 first quarter, cash and cash equivalents were $421.6 million. Unrestricted cash and unused corporate revolver capacity was $661.1 million. The company has long-term debt of $763 million. Plus it has long-term solar energy system financing and capital lease obligations of $1.7 billion.
SunEdison presents an opportunity to invest in a company that has tremendous growth prospects from solar energy deployment all over the world. With operations in the U.S., Europe, and Asia, the company is positioned well to take advantage of this growth. Its Semiconductor division has been restructured and is showing growth and profitability again. Combined with the solar division and its 50 years of technology leadership, this is a technology giant that is rising again.
Disclosure: I am long SUNE. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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