LDK Solar: Soon-To-Be World Leader?

Two year old LDK Solar (LDK) is a major fast-growing manufacturer of multicrystalline solar wafers, which are the principal raw material used to produce solar cells. LDK sells multicrystalline wafers globally to manufacturers of photovoltaic products, including solar cells and solar modules. The company trades on the NYSE and has almost 3,500 employees.

LDK's major advantage over other wafer makers around the world is its unique manufacturing process, which is based on proprietary production processes utilizing both virgin and recyclable polysilicon for ingot production. That means significantly lower costs - hence higher profit margins, which are 30% and above.

LDK maintain strategic cooperations with companies such as GE (GE), BP (BP), SHARP and more.

Contracts

LDK's total contracts sum up to $2.358B:

• Canadian Solar (CSIQ) - $534 M
• SolarFun (SOLF) - $266 ML
• ChinaLight Solar - $133 M
• Taiwan Mosel Vitelic - $190 M
• Taiwan NeoSolar Power - $495 M
• Taiwan Solartech - $224 M
• Chuan Yi Investment Company - $516 M

With 30% expected profit margins, that means an addition of $700M to stockholders' equity. LDK is expected to double its equity in the next two years to $1.2B. the company is also expecting to expand manufacturing up to 15K metric tons by 2009, which means potential $600M in NET profit for 2009, or P/E=6 for the current market price.

Disclosure: Author has a long position in LDK

Comments

[Chimin Sang:]

While they have "proprietary production processes", their accounting method is also "proprietary".

2007 Oct 28 02:34 PM

[asaf:]

notice that all of the $2.3B contracts have been signed during Q3 alone, and additional contracts are expected to come.

2007 Oct 30 06:21 AM