ezetrader

LDK Solar: A Spark of Light

You forgot to mention that net margins were 22.7% up from the last quarter of 22.5%, a result of management producing higher efficiencies and cost savings. It appears that LDK has a complex formula that increases their ASP when the cost of the polysilicon increases. On top of that, management was smart enough to sign long term contracts and keep an inventory of $656 million, mostly for polysilicon feedstock. As their in house poly production comes on line, they will reduce inventory to free up cash to finance more expansion.

They have backorders for over 12GW of wafers which is about $20 to $30 BILLION in revenue depending on ASP (currently at about $2.40/watt). Today they added another 300MW deal that included a cash downpayment.

From their conference call, I am guessing they will have 2008 EPS of about $3.50 which is about double what the analysts expect. This revenue is from wafer sales alone. They plan to increase wafer capacity from 1.2GW in 2008 to 2.2GW in 2009. Now consider that they expect gross margins to almost double when their in house poly in complete, you get forward EPS in the $10 to $15 range.

* Lowest cost producer in the industry
* Blow out earnings, 2 to 3 times estimates
* 12GW in backorders
* world's largest polysilicon plant on schedule
* Forward PE in the low single digits
* over 100% revenue growth per year
* a renewable energy market that is expected to explode for the next 10 years.
* A game plan that has customers financing expansion of their plants.
* CEO Ziaofeng Peng, China's Entrepreneur of the Year
* Short squeeze coming soon, short shares of more than 50% of available float

In my opinion, a grossly undervalued stock with huge growth and huge earnings.