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Three Short Ideas: PF Chang's, Palm, LDK Solar

LDK is the world's largest solar wafer maker with the lowest cost production in the world. Skeptics did not believe they could also build the world's largest polysilicon plant. Now that the plant is in startup, the shorts are praying that the market turfs before full production or else this will be one hell of a squeeze. Shorts are probably caught unable to find shares to cover and are doing their best to hedge their position and hold the price down.

On March 12,2009 LDK was at $4 with short interest about 11.5M, April 30 it was $8 when the short position was 12M. Today it is over $11 with a short position over 19M. Get the picture.

I am currently long LDK with some ultra dow puts.

LDK Solar: Guidance Disappoints, But Opportunity Awaits

LDK is destined to lead the world in wafer production. The key is the polysilicon production.

I recommend the non believers look at page 9 in the latest LDK presentation which has a chart made by Morgan Stanley, on the biggest wafer producers in the world. The Feb 19, 2009 presentation is on the LDK web site in the investor relations section.

media.corporate-ir.net...

Key info here is that LDK is currently the largest wafer producer in the world and has the lowest production costs at $0.30 per watt.

Add the current cost of polysilicon at about $110 per kg and 6.5 grams per watt and that adds about $0.70 per watt.

LDK should have current total costs around $1.00 per watt.

Next step is to bring the cost of polysilicon down to the design of their polysilicon plant of around $30/kg and you get only $0.20 per watt for polysilicon. Future total cost per watt of $0.50 per watt. ($0.30 production cost plus $0.20 polysilicon cost)

Now for some simple math. Current LDK capacity is 1500 MW per year.
If ASP( average sale price) is $1.60 per watt as stated by LDK of Feb 19,2009 then using todays average silicon cost of $110 per kg,, we get earnings of 0.60 per watt or about $900M or about $7.50 per share for 2009.

Now project the numbers out about one year or so when LDK had their own polysilicon plant fully operational and costs are $0.50 per watt.

ASP could be as low as $1.00 per watt, which would put most other wafer producers out of business. Assume capacity has increased to 2000MW. With costs of $0.50 per watt, LDK would have 50% margins and earn about $9 per share.

Conclusions. LDK will be the lowest cost producer of wafers in the world. LDK can continue to make good profits when all others are in the red.

With wafer costs selling down to $1.00 per watt, solar power can reach grid parity in many parts of the world. Demand should sky rocket.

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.

Closing LDK Solar, Keeping Trina

You may be right about TSL as I also hold a long position. But I don't think it wise to abandon LDK until later. Goldman Sachs just increased their position in LDK by 179,970 shares bringing their total to 725,782 shares or about $26 million. I am sure your 150 shares are important to you but I would rather follow GS.

It is also interesting that GS still has a HOLD rating on LDK even though they are buying up shares.

LDK Solar Earnings and the Dark Cloud of Polysilicon Shortages

LDK is the only solar company that will have control of future costs. Their poly plant, which will be the largest in the world, is due to begin production this year. LDK is expecting margins of 42% to over 50% when their poly plant is running, with the lowest operating costs for poly production in the world. The current high poly pricing only makes LDK's poly plant investment even more valuable since other solar companies are much further behind.

No matter what happens to the price of poly, LDK will be in the best position by having their own poly plant with low operating costs. They also have a huge investment in silicon inventory which will keep their costs stable for the next 2 quarters. Per the CC they have over 90% of their silicon needs on hand or under contract.

Update on LDK Solar, Applied Materials Thin Film Deal

Thank you Mr. Peng for avoiding the wrath of Wall Street that seems to punish companies like LDK that have bold plans. Look at what is happening with construction of the world's largest poly plant. LDK shares are being held down by questionable analysts that cast doubts about LDK's ability to execute, even though Peng has build a great company that is one of the world's top solar companies. The analyst like to upgrade other solar stocks such as TSL for cancelling expansion plans. WS hates risk, but I personally like to back smart people with a bold vision. Look at the LDK customer list and billions of long term contracts. They are all backing Peng and LDK with real dollars.

Imagine what WS would be saying if LDK was taking on the thin film plant. The stock price would get killed in the short term. Thank you Mr Peng for keeping most of the risks away from LDK shareholders by keeping the new thin film plant a private company. If he had done that with the poly expansion LDK shares would be much much higher today.

I am long LDK.