zawy's Comments

Serious Questions About Canadian Solar

Thu, 19 Nov 2009 12:44:49 -0500

The decrease in silicon cost does not change the importance of year over year earnings being 18% less (which they did not "keep a secret" as was implied by the author). What happens from here as Germany buys less and Chinese subsidies are gone?

Otherwise, CSIQ is my pick for beating FSLR over the long term.

1 GW manufacturing capability (equal to FSLR's actual production this year) and yet their market cap is 13 times lower than FSLR. Sure, FSLR has 3 times the profit margin and is growing faster, but the factor of 13 makes me wonder.

Trina Solar: First Solar Won’t Be Low-Cost Leader for Long

Thu, 20 Aug 2009 10:05:09 -0400

Road runner, yes, I left out the installation costs, but FSLR is so far ahead in $/W costs, that even with that disadvantage, they are able to stay ahead and will continue to do so for the currency, profit margin, and silicon glut reasons I mentioned. Silicon will stay ahead in efficiency, but it is not clear that silicon will have greater gains in terms of percent of current efficiency. Therefore it is not clear that silicon margins have more to look forward to in the future if we exclude installation costs. FSLR increased efficiency 5% this last quarter. You are clever to point out that as $/W decreases, installation costs become more important, but this assumes installation costs will not decrease as fast as efficiency. FSLR is currently targeting the largest installations which is to their disadvantage when it comes to installation costs. For a residential installation, the cost of contractors just showing up with equipment will be the same no matter how big the job. So installation in smaller jobs may be only be about 25% more for FSLR if they have to install 50% more square feet. The >20% efficiencies you cite are very expensive and the bulk of sales in silicon are <17%. The P/E valuation of FSLR is almost as good as the best silicon solars like CSIQ and TSL. In the last 1 to 2 years, the best Chinese solar P/Es have worsened going from about 5 to 20, while FSLR has improved from 150 to 20, eventhough silicon is cheaper. As silicon costs increase and RMB/dollar changes, I would not be surprised if FSLR P/E at the current market cap is 5 in 2 years and the best silicon solars are 50 to 100, with the rest not even making a profit. In comparison to the current trends, efficiency and installation are red herrings. The killer to FSLR's party is going to be tellurium, no later than end of 2012 if they continue to increase production 150% like they've been doing. But they should at the very least triple current production again and hold there for 10 years keeping the current profit margin as their capital expenses greatly decrease. My bet is that the drop in P/E will continue and it will look like a great buy in 1 to 2 years and then I'll sell before the negative tellurium announcements start trickling in. If rate of production increase slows, it will be a hold for 5 years. They may wisely slow installation of new lines in order to delay a runup in tellurium price from their own demand. heir tellurium costs could go from $0.03/W (?) to $0.30/W.

Trina Solar: First Solar Won’t Be Low-Cost Leader for Long

Wed, 19 Aug 2009 17:38:40 -0400

FSLR production has been increasing 150% yoy for the past 7 years and their P/E is 19. There's nothing "high-flying" about that. FSLR will also continue to decrease it manufacturing costs $/Wp at a similar pace, so it's questionable if TSL can catch up even if the silicon glut continues. TSL's $0.73/Wp not counting the silicon costs (the inaudible part in the transcript) is only a little lower than FSLR's $0.83/Wp total cost. As the dollar decreases in value to FSLR's advantage and the RMB increases to a fair value to Chinese solars' disadvantage, FSLR should stave off any Chinese solar threat for years to come. This assumes they can acquire the tellurium, which should be possible through 2012 as long as China drives higher copper production. Don't forget FSLR has nearly twice the profit margin as any Chinese solar even in the silicon glut so that FSLR can greatly lower costs in the event any unforeseen threat arises.

'Longer Term, Everyone Thinks Apple Is Going Higher'

Mon, 27 Jul 2009 12:44:42 -0400

Two on the show also said "with 9 analysts saying it will go higher, it makes you want to automatically sell." Last year blackberry users were saying they would never sacrifice a thumb-board. Now reviewers are saying they will not go back. It appears to me the game has already been won: software makers of all sizes are full steam ahead on producing programs for the iPhone. 2 years of profits form AT&T contracts are not even figured in yet and were double the reported profits. 5 times as many sales over the prior year, and the new device and lower prices were only in the last 2 weeks.

If any non-techie wants a good, simple pocket computer, this is it. they will choose iPhone.

People still have not come to terms with what a pocket computer really means, here's a partial list.
phone - calculator - calendar - email - notpad - contacts
stock tracker - trader
camera with video (soon teleconferencing)
TV with autoprogramming
compass - GPS - map - kid tracker/emergency response
wikipedia in your pocket
remote control of your desktop (VNC is easy and free)
yellow pages
piano, flute, inclinometer, ruler
weather - news - sports
language leaner - translation
...and oh BTW, it also has a good internet browser, GAMES, soon every book and magazine ever published, and MP3s.

Books, movies, magazines, teleconferencing, and MP3s provide another level of potential profit. Google with as an open source competitor across all devices will be 5 years years behind technically, and 10 years behind on bells and whistles and popularity. Blackberry niche is fading as fast as Palm and Nokia.

Bespoke's Commodity Snapshot (10/23/08)

Tue, 28 Oct 2008 11:07:53 -0400

I agree with Ca Dan. So many sources use such crummy scaling of the data that graphs are usually useless without careful mental calculations. Fast Money for example is the worst.

Emerging Markets With Low Valuations

Wed, 03 Sep 2008 09:34:00 -0400

Malaysia is a play similar to Brazil: they have oil and food, and one of the safest markets, comparable to australia and singapore.

Global P&E Ratios and Dividend Yields

Wed, 03 Sep 2008 09:29:05 -0400

Are the P/E's in Europe low because people think the Euro is overvalued?

Crude Oil at $122 Is Good News for Refiners

Fri, 01 Aug 2008 11:27:52 -0400

VLO used to trade right with the price of oil. As oil went up, VLO went up twice as fast as its margin increased. Then above somewhere between 90 and 110, VLO started trading inversely. I don't get it.

Thailand: Is the Magic Gone for This Cinderella Story?

Wed, 30 Jul 2008 14:38:47 -0400

Rice was first grown in Thailand.

iPhone Can Replace Laptops for Majority of Computer Users

Tue, 08 Jul 2008 17:33:48 -0400

Notice that everyone who agreed with the article's premise owns an iPhone and knows from experience that what the aerticle says. None of those who disagreed indicated that they have even tried an iPhone. I've tried an iphone. I've seen other's change in laptop use from it. My estimate is that time-wise it replaces at least 50% of the laptop. 90% for some people. Personally, when i type i am usually goofing off like right now and would prefer a laptop. But when i'm doing real work, i'm usually just reading the internet.

Fundamental Analysis for Emerging Markets

Thu, 26 Jun 2008 12:45:59 -0400

Don't forget singapore. PE is 14, inflation is a shockingly low 1%, and growth is among the best. It's the new new york. A uniquely independent and mixed center of Asian business and culture and one of the most trusted markets in the world. Housing has always been expensive there and has not gone up much in the past 8 years. A fantastic place for the young and food lovers, it will continue to be a center of biomedical research and the business and cultural elite. What country has a better personality and looks so happily towards the future?

Another bet similar to the Brazil play (good growth and net exporter of oil and food), Malaysia is in a similarly great situation with a 23% lower PE than Brazil and lower inflation and equal growth. Malaysia surprisingly (to me) has one of the most trusted markets in the world, better than Brazil and Australia. Malaysia also has better P/B and dividends. FSLR chose it as it's home for new high-tech solar plants. Also compare Malaysia to Thailand: similar PEs even after a recent 20% drop in Thailand, Thailand is oil-dependent, higher inflation, similar growth, less-trusted market, and current political risk. Only thing good about thailand is that it makes a lot of cars (for foreign companies) that could get sold to china.

iPhone in China - What It Will Mean

Thu, 12 Jun 2008 08:54:13 -0400

People don't usually get paid for the seeking alpha articles they submit. They're just Joe Schmos

Why I'm Not Cutting Back Trina Solar before Earnings

Fri, 06 Jun 2008 16:05:11 -0400

If c-Si degrades only 0.07% per year, then a good design could last as long as the electrical joints and glass cover hold up. 40 years would be only 3% below say 18% initial (assuming your 0.07% is in terms of absolute eff and not as a percentage of eff). Your a-Si is apparently percentage of the eff and not absolute eff.

So this strengthens my and another posters point that you didn't address: it seems clear that CIGS can never beat c-Si for residential installs, and that c-Si residential is currently roughly cost-competitive with FSLR and CIGS when taking lifespan and install costs into account. One thing to remember about residential is that estimates for those install costs are something like 30% for batteries that aren't necessary and not included utility install costs.

Using EEstor capacitors with today's c-Si and an EV is cheaper than using a gasoline combustion engine. At $5/Wp installed and 40 years, it's $0.057/kWh. With a 7% loan and mortgage interest tax deduction, that comes to $0.13/kWh and you don't have to worry about inflation in your electrical bill for things like carbon credits. If EEstor capacitors are sold this year as they claim, energy storage for overnight won't cost much more.

Why I'm Not Cutting Back Trina Solar before Earnings

Fri, 06 Jun 2008 12:06:17 -0400

Steve, what is the lifespan of c-Si compared to AMAT, CdTe, and CIGS? If it's nearly double, then the nearly double cost/watt for c-Si comes out to be the same cost/kwh. $/kwh is what matters, not $/Wp. Then there's installation costs which are 1/2 as much for c-Si since it has nearly double the efficiency. Now consider that c-Si is more applicable for home installation for these reasons, which means there's not going to be a 40% loss in transmission since we're saying thin-film is mainly for the grid. Now consider the c-Si are currently growing faster than FSLR and that FSLR will not reduce its costs as much as c-Si in the next few years if price of Si goes down.

Electric Cars for 2010: Shift from Foreign Oil to Riding on Local Renewable Energy

Thu, 05 Jun 2008 15:52:33 -0400

If EEStor produces it's capacitor this year as planned and as described, this article and all the comments above become irrelevant. Focus, people.

An EV uses 1/4 the energy of a combustion-based vehicle of the same weight due to the inefficiency of the engine. If EEStor succeeds, today's solar cells with an EV would be cheaper than today's gasoline-powered vehicles. With lithium and carbon composites, it's also possible, except there's not enough lithium. There's plenty of barium and titanium for EEstor.

Is the Malaysian Stock Market Due to Fall?

Fri, 30 May 2008 11:32:53 -0400

Everyone above is being ridiculous. Malaysia will outperform if not stun in the next 10 years. It's a net-exporter of oil, food, and steel. Inflation is low. GDP growth is 7%. PE is 15. This beats the U.S. markets hands-down on all counts. Only Brazil can compare, except it has lower cost labor, more high tech companies are moving operations there, and it's in China/India's back yard. It's one of the most trusted markets in the world.

Global Stock Market Performance

Thu, 22 May 2008 13:23:57 -0400

Singapore. Great place with great future. Extraordinarily diverse. Very high tech, including bio. A Western-friendly center of Asian business. Inflation is 1%. The current no-brainer in foreign markets. See EWS

Malaysia. High Tech. Labor going to be less than China. Politically and socially very secure for foreign investment. Oil and food independent. 3% inflation. Similar future to Brazil, but better value right now. See EWM

The Wind Beneath Trinity's Wings

Mon, 05 May 2008 06:28:06 -0400

CPTC.OB is not exactly a "start up". It's more like a spin-off and merger with a strong German heritage. It has over 500 installed turbines with a unique gearing system in its upcoming model that doesn't require the fancy GE-patented electronics for frequency regulation. BCON.OB might also be considered a utility and wind-play. Its flywheels are going to be used in California to even out the voltage and frequency from wind farms as well as traditional plants especially where carbon credits are important.

Further Musings on Solar Stocks

Thu, 24 Apr 2008 12:38:59 -0400

You wrote "FSLR has to build two panels in order to generate the same amount of electricity that a single poly-based panel will make." Do you have a link that shows poly modules will be 24% efficient in a few years? Do you have a good link that discusses the future of polysilicon prices?

When Will Solar Achieve Grid Parity? We're Already There!

Thu, 24 Apr 2008 08:11:23 -0400

Jack, stop fudging everything! 24*0.71/6= 2.666 so solar is "almost 3" and not "a little over 2" times more expensive per W installed than for coal. The real competitor that investors should be interested in is nuclear which is 24*.9/6= 3.6 times more nuclear energy per W installed over solar W installed.

Solar Power Will Be Transformational in the Next Decade

Thu, 24 Apr 2008 08:05:11 -0400

Jack, you changed the input data to "prove" your point. We were talking about 13 cents/kWh and you're using a gracious "effective-efficiency-... of 30 years instead of the standard 25 years. A 3rd source of fudging is that you didn't do APR correctly. Even with your gracious 30-year effective-efficiency-l... monthly payments would be $60, so the rate is 16.4 cents/kwh instead of 15.

If you'll look at my comments, you'll see that i similarly found that $5.4/W is break even for 7% loan and if electricity costs rise 3% a year and if we can get a interest deduction, so we're not really in disagreement. I just want the math and assumptions to be correct and precise. Being off just 1 cent/kWh over 30 years is $3,900 on a 6 kW system (about $2000 in today's dollars when adjusted for inflation).

When Will Solar Achieve Grid Parity? We're Already There!

Wed, 23 Apr 2008 16:27:38 -0400

Jack, I got lucky and found a reference. It says coal operates at 71% of capacity and nuclear operates at 90%. 71% of 24 = 17 hours, almost 3 times more than solar cells in a 6 kWh/d/m^2 area.

www.geo-energy.org/pub...

Solar Power Will Be Transformational in the Next Decade

Wed, 23 Apr 2008 09:15:30 -0400

Your article doesn't take into account the upfront costs when calculating payback. You assume banks will give out 0% loans on the initial $30K investment, or that rich people who can afford the upfront costs are satisfied with 0% return on the investment. If electrical grid energy costs increase 3% per year and you or your bank are satisfied with 7% return on the $30K investment, you have to use a 7%-3%=4% depreciation factor. In this scenario, the $4.5/Wp installed costs you propose in a typical 6 kWh/day/m^2 location (this includes clouds!) at today's 13 cents/kWh, it will barely break even over the 25 year "efficiency-effective" lifespan of the solar cells. If it's in a new house where you can depreciate the home interest expense and are in a tax bracket of 25%, then the depreciation factor is 7*0.75-3=2.6% then payback can occur at $5.4/W installed which i believe is very doable.

There is no simple energy storage solution. The raw materials in EEStor supercapacitors cost $10/kWh, about 50 times less than current generation lithium-ion. See BCON for 10-hour energy storage with 25-year lifespan that could cost less than $1/kWh. Even at $1/kWh, storing half the energy of Jacks $30K, 7kW system in 6kWh locations will cost 7x6/2= $21K. Flywheels with carbon nanotube technology ($4/pound in 5 years) could solve the energy storage problem. They use vacuum and magnetic floating to keep 80% of the energy for 12 hours. Currently used in energy storage for cranes, trains (start/stop regeneration), and telephone systems.

When Will Solar Achieve Grid Parity? We're Already There!

Tue, 22 Apr 2008 13:16:29 -0400

It has been clearly demonstrated and backed by FSLR comments that solar is not competitive with coal or nuclear until installation costs have reached $1.5/Wp. The biggest error in your article is that you seem to equate a solar Wp with watts. Over the 25 years or so for a solar system, there is only 6 kWh/day for each 1kWp installed in sunny locations whereas a coal or nuclear plant is producing 24kWh/day for each 1 kW installed. So first you need to multiply your solar costs by 4 to be comparable. Then consider nuclear plants last 40 years and cost about $3/W installed, which is 2 times cheaper than $1.5/Wp of a solar installation since
1W = 4 x 1Wp
In other words, you have to install 4 Wp of solar to get the same output of 1 W installed of coal or nuclear. Then consider nuclear lasts 60% longer. These advantages are offset by the fuel, disposal, regulatory, and maintenance costs of nuclear. In short, it has been well-documented that $1.5/Wp installed solar is equal to 5 cents/kWh in sunny locations and assuming 25 year lifespan and 5% loan on the capital costs. 5 cents/kWh is the same costs utilities get from coal and nuclear, using the same 5% loan scenario.

Coal puts out far more radiation than nuclear. Nuclear plants can be built in 4 years, at least outside of the U.S.

First Solar Now in Its Third Leg Up

Mon, 21 Apr 2008 12:24:30 -0400

Judging from the last immediate 25% increase after last earnings report when there was a 50% surprise, the near-100% surprise this quarter should see 25% again. There's been another 25% since the initial surprise-increase meaning a mere 50% surprise may already be factored in.

The first equation used not adjusting for exchange rate as a way of being conservative. They expect new facility build costs to be maybe $30M higher this year which can decrease profit 7% ish. The second equation adjust for the better exchange rate.

First Solar Now in Its Third Leg Up

Mon, 21 Apr 2008 09:53:31 -0400

How is it in the least bit sane for the HIGHEST estimate for the current quarter to be 20% lower than the last quarter in a high-growth company, and when the exchange rate has improved the outlook by 1.47ish/1.39 = 5%? If production increased the expected 20%, it all adds up to 0.77*1.05*1.2 = 0.97, a whopping 54% above the HIGHEST estimate.

First Solar Now in Its Third Leg Up

Mon, 21 Apr 2008 08:38:41 -0400

How much share dilution potential is there? Especially if they need to double number of plants by end of 2010 to keep up production growth. Has there been any word on new plants after the Malyasian plants are complete in 2009?

First Solar Now in Its Third Leg Up

Mon, 21 Apr 2008 08:01:25 -0400

It appears from the 10-K that they were capable of producing 77 MW in 4Q 2007 but net from sales was $111 M which means 111/77 = $1.43 net /Wp instead of $1.3ish/Wp due to favorable exchange rate. Exchange rate was 1.3 then 1.39 in 4Q, and now is 1.57.

I can't tell you quarter to quarter because of when lines come on and the financial calculations include all kinds of quarterly variations. The biggest in this case is exchange rate and tax. To turn the question around, if they made 0.77 EPS in 4Q 2007, why in the world should 2008 not be at least = 4*0.77=3.08? Was there an accident in 4Q 2007 that will not continue to occur?

Please note that the guidance in the summer of 2007 predicted for 4Q 2007 the following:

77MW*1.3profit/watt / 80M shares = 1.25 EPS before taxes etc. 0.77 EPS actual was not a surprise at all. The estimates seems to be based on disbelief instead of reality, or the estimators are trying to force surprises for personal gain.

4Q 2007 seems to be stabilizing towards an accurate picture of expenses giving 31.5% net/gross sales (after taxes and everything), which is 56.8% overall net/(gross sales-cost of sales). They claim to be able to maintain sales profit/W, but I'll assume the $1.44 profit/W was an exchange rate and production anomaly and use a more conservative $1.2/W.

EPS=64MWp 4Q 2007 * $1.2 profit/Wp * 0.568 income/profit * 1.195^N / 81 M shares

Where 64MW 4Q 2007 comes from curve fitting 2007, 2008, and 2009 production: 201MW, 396MW, and 836MW. 77MW was the actual for 4 Q 2007. N is number of quarters past 4Q 2007. 1.195 is the quarterly 19.5% growth from the curve-fitted 104% yoy growth: (1+1.04)^1/4 = 1.195. 104% yoy growth is a slowing of the previous 5-yr 167% yoy growth trend.

The equation gives:

EPS 4Q 2007: 0.54
(lower than the actual 0.77 because of curve-fitting approx of production and because actual profit/W was 20% higher due to exchange rate)

1Q 2008: 0.64
2Q 2008: 0.77
3Q 2008: 0.92
4Q 2008:1.1
2008: 3.4
1Q 2009: 1.31
2Q 2009: 1.57
3Q 2009: 1.87
4Q 2009: 2.24
2009: 7.0

Assumes no more share dilution and conservative 1.3 $/Euro exhange rate instead of 4Q 1.39. At 1.39 exchange rate, increase numbers by 20%

They have to announce this summer new production lines for a doubling of capacity by end of 2010 in order to have two years to complete plants to keep up the trend. Not keeping up the addition of new lines will be a crushing blow.

Now backing up a little, there is another conservative number that takes the new exchange rate into account. Using the net/gross sales of 31.5% and assuming gross AND ALL COSTS (conservative) go up directly with euro:

EPS = 64 MW 4Q * $2.4 gross/Wp * 1.57/1.3 exchange improvement * 0.315 net/gross * 1.195^N * 0.984^N

0.984 is quarterly decrease in gross at contracts' -6.5% APR.

EPS is 4.4 for 2008 and 8.4 for 2009.

EPS for each quarter after 4Q 2007:
0.85
1.00
1.17
1.38
1.62
1.91
2.24
2.64

First Solar Now in Its Third Leg Up

Sun, 20 Apr 2008 16:29:14 -0400

So at these prices, the yahoo forward PEs should be 87 for 2008 and 40 for 2009, worst case scenario. The problem is if they can keep up the trend for 2010. I haven't read anything about new plants in the works after Malaysia.

First Solar Now in Its Third Leg Up

Sun, 20 Apr 2008 16:20:26 -0400

Due to how various things are calculated, there may be substantial variations each quarter. But the long-term (3 yr+) of yearly profits should be very reliable. As a minimum, 2008 will see 380 MW sold for $2.3/W at 30% net income which gives 380M*2.3*0.30/80M shares = $3.3 EPS. This is much higher than the $2.5 EPS yahoo estimate and exactly inline with the 167% yoy 5-year trend in growth: EPS 2007 was $1.25 x (1+1.67)=3.3. The estimate appears definitely low. Even $4 EPS is reasonable as long as the exchange rate remains favorable, but the math and business model stability proves 3.3 +/- 0.2. 2009 will see 830 MW at $2.15/Wp giving 7.2 EPS in 2009, way above the $5 EPS estimate. Error is no more than 0.5 with exchange rate stability.