At first glance, ReneSola's (SOL) third-quarter results were ugly. Operating margin came in at -43%. The company admitted a huge strategic mistake as efficiency improvements at a polysilicon production plant were not enough to bring production costs in line with market prices. Shutting the factory resulted in a one-time, $202.8M asset write-off. Since Q3 results were reported early on Thursday Dec 5, shares are down ~27%.
However, if we look past the assets that were written off, ReneSola had a great quarter. The following numbers are all in terms of Q/Q:
- Revenue was up 11/1%
- Module shipments were up 6.6%. Total module and wafer shipments were up 0.2% (i.e. SOL is selling fewer wafers and using more for in-house module production)
- Cash is up 8% to $438.5M
- Debt is down 8.6% to $831.2M
- If we overlook the one-time write off of the polysilicon plant assets, operating margin would have been +5.4%.
As we can see from the numbers, SOL is in no risk of bankruptcy and the closing of the Phase I poly factory will help profit margins in the future. As my recent article pointed out, the top eight solar manufacturers are already pushed almost to 100% utilization -- that bodes well for average selling prices in the future. Finally, Sneha Shah has already pointed out how ReneSola was undervalued compared to its competitors as of November 20th. That was at $4.50!
With the stock now trading at $3.30, I urge my readers to look past the accounting technicality on the polysilicon factory and recognize the deep value that ReneSola represents.