Solar Energy IPO: ReneSola Competes With LDK Solar

ReneSola (SOL) is a Chinese manufacturer of solar wafers. The company's main focus is monocrystalline wafer production.

All quotations are from the company's most recent F-1 filing with links provided.

Business Overview (from prospectus)

We are a leading Chinese manufacturer of solar wafers, which are thin sheets of crystalline silicon material primarily used in the production of solar cells. Our customers include some of the leading global manufacturers of solar cells and modules, such as JA Solar Co. Ltd. (JASO), Motech Industries Inc., Solarfun Power Holding Ltd. (SOLF), Suntech Power Co. Ltd. (STP) and Topco Technologies Corp.

We have focused historically on manufacturing monocrystalline wafers and have accumulated extensive experience and expertise in developing and using monocrystalline wafer production technologies. We primarily offer 125 mm by 125 mm monocrystalline wafers with a thickness of 200 microns. In the second quarter of 2007, we also began to offer 156 mm by 156 mm monocrystalline wafers with a thickness of 200 microns at customers’ requests. As part of our expansion plan, we began the production of multicrystalline wafers in the third quarter of 2007. Monocrystalline cells are made from monocrystalline wafers. Solar power products that use monocrystalline cells generally yield higher conversion efficiencies, which refers to the ability of solar power products to convert sunlight into electrical energy. On the other hand, multicrystalline wafers are less expensive to produce and have less stringent raw material requirements. With our production of multicrystalline wafers, we expect to realize cost synergies by utilizing some of the silicon materials reclaimable from our monocrystalline wafer production process.

Offering: 10.0 million shares at $15.45 per share. Net proceeds of approximately $127.3 million will be used to expand the company's solar wafer manufacturing facilities and purchase additional equipment for wafer capacity expansion; to invest in polysilicon manufacturing production; to repay debt and for general corporate purposes.

Lead Underwriters: Credit Suisse, Deutsche Bank

Financial Highlights:

Our net revenues increased significantly from $52.1 million in the nine months ended September 30, 2006 to $152.9 million in the nine months ended September 30, 2007 due primarily to an increase in solar wafer sales... Our cost of revenues increased from $36.3 million in the nine months ended June 30, 2006 to $119.1 million in the nine months ended September 30, 2007... Our gross profit increased by $18.1 million from $15.8 million in the nine months ended September 30, 2006 to $33.9 million in the nine months ended September 30, 2007... our net income increased from $16.0 million, or 30.7% of net revenues, in the nine months ended September 30, 2006 to $25.5 million, or 16.7% of net revenues, in the nine months ended September 30, 2007.

Competition:

Our competitors include specialized solar wafer manufacturers such as LDK Solar Co., Ltd. (LDK), Jiangsu Shunda PV-Tech Co., Ltd. and Jinggong P-D Shaoxing Solar Energy Technology Co., Ltd. Our competitors also include solar wafer manufacturing divisions of large conglomerates engaging in solar wafer manufacturing such as Deutsche Solar AG, Kyocera Corporation and M. SETEK Co. Ltd. Many of our competitors have a longer operating history, stronger market position, greater resources, better name recognition and better access to silicon raw materials than we do. Many of our competitors also have more established distribution networks and larger customer bases. In addition, many of our competitors are developing and are currently producing products based on alternative solar power technologies, such as thin-film technologies, that may reduce the dependence on solar wafers for use in solar power products.

Additional Resources:

• Company website
• Online road show
• AP: 'Solar wafer maker ReneSola plans IPO'
• Thomson Financial: ReneSola says recent contract wins will help meet growth plan for 2008

Comments

[ytterbius]

These guys don't look like a good bet to me. They're late to the game, and they don't appear to be planning on a scale to put them in competition with LDK.

[Iscaethebear]

There is a shortage of wafer so there will be plenty of people (companies) willing to buy from them and they have a customer list.

[William Vernisie]

Thin film technology is definitely the direction industry is leaning towards and I think the individual investor should be looking more in that direction as well.

[fxtrader07]

these guys come at the worst possible moment to tap the stock market and they come at the worst possible moment to enter an industry which is getting more competetive by the hour.
contrary to ldk there is zero visibility for the investor apart from promises and wishes expressed by the company.
until they prove they have some distinct competetive advantage they stand to lose right from the start as they have to get contracts build capacity and get recognized as a reliable source when others are already two steps ahead.
i would buy ldk , stp or wfr at this point and at their current prices rather than jumping into a very doubtful ipo

[fxtrader07]

question to the author: what is the reason /motive for chosing ldk for the headline??
it could as well have been wfr or tsl or whatever other company these newbies "compete with" - and they may have been better matches as ldk is way ahead and set to pülay ina much higher league (size) ?