Gregory Pepin

LDK Solar's Deal: Proof That China Supports Solar Industry

Like i said in the article, the deal proves that China will provide funding to support ldk strategy. Now will it pay? It will depend on many elements
- Do they reach their target concerning poly price
- Is the vertical structure the right one or does LDK still have a business to do when non vertical structure. => The cost structure of LDK provide the lowest wafer in the market (if you exclude ESLR technology) so i think they might still find markets with JV system for exemple
- Their balance sheet should be clean, thanks to the deal. But for how long since they have still some capital expenditure to do

I would say, LDK took a very aggressive approach with their Poly plant. It is an aggressive enough move to at least keep the stock under radar since it could payoff if some outside indicator move in their favor (Especially poly price that would hurt vertical integrate company and strenghen their cost advantage with their in house poly plant assuming it work at the price target they expect)

Also, i wouldn t attack Q-cells and say they would go out of business because they have an interesting portfolio of diversify solar technology and also have a strong customer base. LDK cannot leave without Q-cells and so does Q-cells with LDK even if it isn t the only producer of Wafer. Also keep in mind ESLR and Q Cells are very close (with their JV in Sovello) i wouldn t be surprise to see collaboration on the Wafer side like Q-cells does on the module side with SolarFun

Bargain of the Week: First Solar

JN King,
any update on the technical side with the bounce of friday?


On Aug 07 11:19 AM J N King wrote:

> With the bullish employment report, the market is looking pretty
> good. FSLR is flirting with that 200 day SMA. Yahoo shows that sometime
> today it was above 145.89. Again, a close above that line would be
> bullish, below, hello 130, IMO.

Bargain of the Week: First Solar

Good way to look at FSLR investment.

Just wanted to say, i think solar demand will strongly pick up when the credit market will be fully recovered (thx to stimulus etc and this environment invesmtent mind that is opening up now)


On Aug 08 03:42 PM Camden wrote:

> Excellent article and some excellent replies. I think there valid
> argruments to be made on both sides. Whether or not FSLR is currently
> a good investment will depend on several factors mentioned above
> and some others, including:
> 1. It's ability to keep lowering it's cost/watt.
> 2. It's ability to maintain it's margins
> 3. How fast demand picks up for the solar industry as a whole
> 4. How fast the cost of producing polysilicon decreases
> 5. If the supply of polysilicon can keep up with demand (if it outpaces
> demand the price will fall to about production cost and stay there
> until demand picks up dramtically
> 6. The advancement of competing technologies
> 7. Passage of government legislation
>
> My guess is that First Solar is likely to see it's margins compress
> as competition heats up. That will likely cause further PE compression.
> Earnings may increase without much increase in stock price. I've
> been invested in FSLR for most of the past three years and it's been
> a good ride. I suspect they will stay the leader (in terms of profits)
> for at least another two years due to long term contracts already
> in place if nothing else. Competitors have a LONG way to go to catch
> up. I'd also guess the future holds MUCH less annual stock price
> appreciation going forward. My stock position has been cut 75%. I
> need to see how this current situation plays out over the coming
> year before taking what I consider to be a "full" position again.

Bargain of the Week: First Solar

In order to complete my answer to Jack, if you look at the presentation of ESLR to analyst (available on www.evergreensolar.com.../ (PRESENTATION)) if you look at the slide 12. They describe the Wafer cost. We all know that Evergreen Solar has the best wafer technology (in term of cost structure). (That is aside of the quality of their management or whatever else, i'm purely talking in term of cost structure and expense to produce a wafer). They target a wafer price (if silicon is at 50$/kg) of 0,29$ for them and 0,50$ for the best of breed (the difference comes from the String ribbon technology that owns ESLR). And based on this projection they expect in 2012 a price of 1$/w in China (with a labor cost that will be close to other business like YGE and the difference in labor cost would probably be offset by the cost advantage for their wafer). So if you take the entire cost structure, the projection of 1$/w sounds realisitic by 2012 and right now FSLR is already below 80c and project to be below 70c. So i do believe that FSLR will still have a major cost advantage with their technology.

The projection cost (and the structure of the panel cost give by ESLR) is interesting to look. Even if you like or not their management it is according to me a very interesting projection over 2012.

Bargain of the Week: First Solar

I would like to point out some elements :
- I don't see poly price at 35$/kg over the long term. I still believe that 75-150$ range is more realistic.
- Concerning FSLR panel, i agree with you it needs more space but the most profitable project are the big one (that has the "real estate" space) and not the small project. And FSLR is a leader their. You have to add around 20c of cost intallation per watt on FSLR panel. Even by including that, they still have a solid advantage.
- Surprisingly, FSLR is also a leader in the residential market in front of ESLR (based on solarcity market only).

I do believe that FSLR deserve a higher P/E for many reason : Stronger balance sheet / Strong Backlog / Best cost structure in the business / Best market network and customer network / Best Management.
I also agree that Poly company has a too low P/E.


On Aug 08 03:48 AM Jack Yetiv wrote:

> I respectfully disagree with the author and quite a few of the commenters.
> With poly at $35/kg, and assuming 5 g of poly per watt, the poly
> cost in a panel is 17 cents/watt--an almost irrelevant cost, and
> probably equal to the Cd and Te that FSLR puts in its panels.
>
> So low-cost poly DOES essentially kill FSLR's "supposed" cost advantage.
> As an aside, Si is one of the most abundant elements on earth, and
> on a longterm basis, there is no reason for poly to cost $35/kg,
> especially as manufacturing processes to make poly become more efficient,
> given that the raw material to make it is pretty cheap.
>
> I use the term "supposed" for a reason. Assume that FSLR produces
> panels with 10% efficiency, and its competitors 20% (SPWRA produces
> 22% panels today, the Chinese fabs are at 18-19%). Even assuming
> FSLR's Cd/Te costs were lower than the poly costs, FSLR MUST BUILD
> TWO PANELS to generate the same amount of power as ONE doubly-efficient
> poly panel. The aluminum, glass, fabrication, etc cost of the second
> panel must also be taken into account. Also, if high-efficiency
> poly panels are put on trackers, FSLR's cost "advantage" becomes
> even more spurious.
>
> Finally, FSLR needs essentially twice as much real estate to generate
> the same amount of power as a field of poly-based panels (almost
> three times as much if the panels are put on trackers). That real
> estate does not come free--regardless of whether it is land in the
> Nevada desert or rooftops.
>
> Taking all of these factors into account, I believe that FSLR does
> NOT deserve a higher forward PE than the likes of TSL, CSIQ, STP
> and SPWRA.
>
> Jack Yetiv

Bargain of the Week: First Solar

Sol invictus,
thanks for your great comment.
I would still like to add this :
-Some chinese company are in positive territory in term of GM but i have some doubt in their earning. Their margin of action is lower then it looks like on the paper. I don't think they can continue to drive down prices. FSLR is producing in Malaysia so they have a great labor cost, probably similar to chinese company. My assumption was a little bit aggressive. I think i should better say : the margin of price negociation is far higher for FSLR and the process of price dumping won't be permanent in Chinese Solar company. In addition to that, i would take a more cautious approach on Chinese Solar company number. The only company i fully trust is SOLF because they have been always very prudent and straight about the crisis effect.
- I agree with with you for LCOE but as far as i know FSLR is still at the top.

Bargain of the Week: First Solar

So if i understand well the technical side of the stock on the short term (once again it is short term as the long term fundamental is great so far). It could drop to 130 if the stock doesn t rebound today.
They were a spike in volume around the resistance to force the stock to go below. I guess the odds are clearly in favor of a quick drop before a rebound. It makes it an even more interesting pick for the long term


On Aug 07 12:22 AM J N King wrote:

> After today's stock action, I'm convinced FSLR is going significantly
> lower. The severe violation of the 200 day SMA today tells me, 130
> will arrive within a few trading days. Depending on volume and general
> market conditions, that level could be tested.
>
> On the other hand, if it closes above 145.89 tomorrow, there may
> be hope for price stabilization. My work, however, tells me that
> it is probably not in the cards.

Bargain of the Week: First Solar

Once again, i think people should focus on cost per watt (which include the conversion rate in it) you will see that FSLR has a huge advantage today.


On Aug 06 11:10 PM TheDetective wrote:

> I agree with Cynnatalie2000 (what a complicated pseudonym fella!)
> in regards to FSLR's technology.. it seems that at least one Chinese
> competitor is right on target to become the cost leader in poly technology
> with their new plants. If that occurs, they will be able to MATCH
> and even improve Thin-film's current cost.. not only that, they would
> do so with a better technology, since the conversion rate from poly
> panels is more effective. How would this LIKELY scenario play out
> for FSLR's future margins? I don't doubt that FSLR has top management
> and excellent execution, however there's much you can do against
> better technology.. I'm not sure if the conversion rate of thin-film
> can be somehow improved with further R&D to compete with poly
> once they reach cost-parity.

Bargain of the Week: First Solar

I won't say they sell inferior product. They sell product with a lower conversion rate. But when we talk about cost structure it is a cost per watt. They still have a huge advance on that side. If the polysilicon drop to 35$, it will still be a very short term price before a probable rebound. 100$ sounds more as a logical price over the long term i think. Now once again, i don't see FSLR as a lower quality product but a lower conversion rate product but the cost per watt is still far better then competitor. The only issue this product has : it needs more space to produce the same amount of electricity but it is done at a lower price.


On Aug 06 05:56 PM cynnatalie2000 wrote:

> FSLR sells an inferior product, but at a lower price. Thus, the
> ample and growing supply of polysilicon is deadly for FSLR. It must
> always undercut the sellers of polysilicon based solar panels.<br/>
>
> The shortage of polysilicon lasted for a while and led the spot price
> to ridiculous levels. Polysilicon may go down to $35 per kilogram
> and that will require even bigger rebates by FSLR.

Bargain of the Week: First Solar

I follow the entire sector and i have some picks i like and other i don't. I think in this industry, the technology and cost structure is off course important but we shouldn't offset the quality and integrity of the management too (especially when you consider Chinese Company)


On Aug 06 04:38 PM pvsolarsalestraining.com wrote:

> I agree with you Gregory. Although someone else may come in with
> a lower price, it will take time for them to get a system in place
> that rivals First Solar.They have a strong name to go along with
> a powerful product. Is this the only solar company you are following?

Bargain of the Week: First Solar

The best advice i could give you rookie is : buy Solar ETF then if you fear to pick one special stock...

Bargain of the Week: First Solar

Well as i stated on my article, it is more of a long term view that i offer. I also say that the best way to build your position would be to purchase a little bit every month as i see a sideways market today.

But the long term fundamentals are solid and the actual price is clearly a bargain ;)

Oxygen Biothérapeutics Deal Update

We decided to invest in the company because we have great expectation over the long term. We really like the management and potential of oxycyte both as an oxygen carrier and also as a topical product. We really do feel that this management is doing a great job and is executing very well and has a very attractive business plan.

Steve Jobs Is (Maybe) Back Already

i just wrote an article about SJ health.
I think they should let him alone with that. It is private matters. The media should focus on Apple core Business that is now in the best shape ever.
But i guess talking about SJ health brings more interest.... and more readers....
Even if Apple is doing great with or without him. But i hope the market will let the guy alone and refocus on Apple.

Still, I hope he is feeling well and wil have a very long life as a member of Apple Management or not.

This is what the Great Recession looks like, in graphs.

Well be careful in the interpretation of those chart.
I agree that the short term "green shoot" doesn't make sense as the economy is in stabilisation mode and not in growth mode. But, bears says that the 30% rise doesn't have any logical explanation. I would argue also that the 30% drop earlier this year didn't make sense too.

We have to remember that even with this big rally since early march, we are still in negative territory for the S&P and the Dow... So it isn't that great of a rally.... if you look at it from early january :)