The Boston Consulting Group (BCG) released a report on January 18, 2011 titled, “Companies on the Move – Rising Stars from Rapidly Developing Economies Are Reshaping Global Industries”:
In the latest report, BCG identifies 23 new fast-growing companies. The new global challengers replace those that may have suffered or lost their way during the Great Recession or that may not be expanding as quickly as this year’s listed companies are.
The 100 challenger companies grew annually by 18 percent and averaged operating margins of 18 percent from 2000 through 2009. During this period, the annualized total shareholder return of the global challengers that were publicly listed was 17 percent. If the challengers continue on their current growth path, they could collectively generate $8 trillion in revenues by 2020—an amount roughly equivalent to what the S&P 500 companies generate today.
If we cross-examine the report criteria along with LDK Solar’s recent guidance for 2011, we confirm revenue doubling again:
For fiscal year 2011, LDK Solar expects revenue in the range of $3.5 to $3.7 billion (source), wafer shipments of 2.7 to 2.9 gigawatts (GW), module shipments of 800 MW to 900 MW, in-house polysilicon production of 10,000 MT and 11,000 MT, in-house cell production between 500 MW and 600 MW, and gross margin between 23.0% and 28.0%. The Company’s prior guidance for fiscal year 2011 was revenue of $2.9 to $3.3 billion, wafer shipments of 2.5 GW to 2.8 GW, and module shipments of 700 MW to 800 MW, in-house polysilicon production between 9,000 MT and 10,000 MT, in-house cell production between 400 MW and 500 MW, and gross margin between 22.0% and 28.0%.
From its main web page:
BCG is a global management consulting firm and the world's leading advisor on business strategy. We partner with clients in all sectors and regions to identify their highest-value opportunities, address their most critical challenges, and transform their businesses.
Our customized approach ensures that our clients achieve sustainable competitive advantage, build more capable organizations, and secure lasting results. We seek to be agents of change—for our clients, our people, and society broadly.
What isn’t so obvious in this report is that LDK Solar is the ONLY solar company identified as a newcomer. Sure Suntech (NYSE:STP) is in the group, but LDK Solar dwarfs STP. LDK weighs in at 3 GW of wafer capability. LDK is building a 1.5 GW cell/module plant in Hefei (1 GW Cells, 500 MW modules) that appears will be mechanically complete in just a few months and fully ramped mid-year. That would suggest around 500 MW of cells added and 250 MW of modules on top of existing capability.
I wanted to see what likely additional revenue this may add. So I chose some price targets.
Let’s say Cells go for $1.20 and Modules for $1.70 in 2011. That would translate to 600 M + 425 M respectively for over $1 billion in additional revenue (It is confirmed in Link 5). Think about it for a minute. That is additional, for just a half years production. LDK just gave 2010 Q4 Revenue Guidance at $870 – $910 M. Now if it can do this in Q4 on a polysilicon plant that is still ramping and adding profit, without the Hefei Cell and Module plant, then going forward, $900 million per quarter should be reasonable without the Hefei $1B adder.
I trust you followed this reasoning to its logical conclusion. (4 quarters x 900 M per Quarter + 1 billion in Hefei)
I think LDK guided low for 2011. Try $4.6 billion as the math suggests, excluding additional polysilicon and PV Parks for a bit of conservatism. Let’s hope margin guidance holds at 25%.
Can LDK Solar gross profits exceed $1.1 billion?
It is my opinion, LDK solar will move in the next year to be the number two PPS valued solar company right behind First Solar (NASDAQ:FSLR) within the year. The numbers suggest slightly less than FSLR current full year EPS. The difference is that FSLR trades around $150.00 and LDK under $15.00! I see tremendous value here.
Anyone interested in a 600+% upside? Volume and PPS direction of late suggests others are.
Okay, let’s insure I maintain credibility and back this bull perspective down because things do happen… So here is my published watered down bull opinion on the matter:
I definitely believe LDK solar will double from current levels within 12 months and BCG did their homework. Do you? You should be happy to know that around 15 million shorts have not gotten the clue either. I’m interested in your opinions.
Disclosure: I am long LDK.
Disclaimer: Forward-looking statements made herein involve known and unknown risks and uncertainties and are based on information found primarily in the links provided and other historical data found in public domain. At times, mathematical relationships are used for comparisons which may be in error or incomplete. As such, no guarantee of accuracy or investment gain or loss can be made. The reader or investor bares sole responsibility for their actions. As of the date of this article, the author has less than 5,000 shares of LDK Solar.